This chart presents a ratio between the STH Realized Profit/Loss Ratio, and its 1yr moving average. This tool provides a view of periods where the Profit/Loss Ratio is experiencing acceleration in either direction, aiding in identification of trend inflection points.

STH Realized Profit/Loss Momentum is calculated as follows:

STH Realized P/L Ratio = STH-Realized Profit / STH-Realized Loss

STH P/L Ratio Momentum = sma(STH Realized P/L Ratio,7)/sma(STH Realized P/L Ratio,365)

Short-Term Holders are typically active throughout the market cycle, and are statistically the most likely to respond in the face of market volatility:

• Owners of recently transacted or acquired coins are likely to carry a degree of recency bias with respect to the coins cost basis. Thus price rising, or falling below that level is more likely to elicit a response.

• Around local market extremes, there is often a net transfer of wealth, as investors take profits near tops, or capitulate near bottoms. This rotation of capital usually leads to an increase in the proportion of wealth held by Short-Term Holders, making them a primary cohort to observe after these events.

Thus, tracking the momentum shifts for STHs realizing profit/loss can signal when macro market trends are at an inflection point.

• 🟢 Realized Profit accelerates during market rallies, as STHs that acquired coins recently come into profit.

• 🔴 Realized Loss accelerates during market corrections, which plunge the STHs that recently acquired coins into a loss, creating panic.