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Cryptocurrency News Articles
The Momentum STH (Short-Term Holder) Cap Ratio Returns to the “WARM” Area
Oct 07, 2024 at 09:13 pm
The on-chain data analysis becomes even more essential as Bitcoin attracts attention from investors all around the globe.
Bitcoin has been attracting attention from investors around the globe, making on-chain data analysis even more essential. One metric that has recently gained traction is the Momentum Short-Term Holder (STH) Cap Ratio, an experimental metric created by BinhDang, a quantitative analyst at CryptoQuant.
The Momentum STH Cap Ratio has returned to the “WARM” area, which is a positive sign that suggests Bitcoin activity is beginning to accelerate, albeit slowly.
What is the Momentum STH Cap Ratio?
The Momentum STH Cap Ratio is a new but relatively simple metric created by CryptoQuant analyst BinhDang. It provides a unique perspective on market direction by calculating the difference between the Market Cap and the Realized Cap. Specifically, it targets short-term holders, defined as those who have been holding tokens for six months or less.
The rationale behind this index is that short-term holders are sensitive to fluctuations in prices, which in turn cause fluctuations in cycles. By deriving a ratio of the Market Cap and the Realized Cap of these cohorts, analysts can gauge the shifts of the major waves and movements in the market.
How does the STH Cap Ratio work?
The Momentum STH Cap Ratio chart provided by BinhDang showcases the movement since 2011 (STH cap ratio of Bitcoin). The metric is observed to be categorized into several phases:
Historically, as this ratio enters the “Hot” territory, we have seen the observation of major Bitcoin price tops. In contrast, the “Cold’ and ‘Cool’ phases depict the lower phase or the accumulation phases in the market.
Current Market Outlook: Momentum Recovery, But Slow
In the latest indicator, the Momentum STH Cap Ratio is seen to be returning to the “WARM” area. This is a positive indication, suggesting that activity is beginning to accelerate, albeit slowly. The chart also indicates that in previous times, the ratio entered this phase, and Bitcoin experienced an upward movement in prices.
Hence, the” WARM” zone implies growing bullish tones, but caution is still advised. Other factors that have been impacting market conditions include inflation concerns, geopolitical issues, and interest rate changes. Such external factors are still keeping the market from quickly bouncing back to enter the ‘HOT’ phase.
Broader Applications Beyond Bitcoin
Similar metrics can be derived for any other token that has sufficient on-chain activity to draw patterns, giving us signals about the sentiment and momentum for multiple assets. As such, tools of this kind will continue to be useful for tracking the dynamics of short-term holders and for modeling price changes in the ever-growing crypto market.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
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