Definition. 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. Shown are the profit momentum (green), the mirrored loss momentum (red), and a bounded momentum oscillator (black) with green/red regime shading.

Technical. STH Realized Profit/Loss Momentum is calculated from entity-adjusted realized profit and loss:

• STH Realized P/L Ratio = STH Realized Profit / STH Realized Loss
• Profit Momentum = sma(STH Realized P/L Ratio, 7) / sma(STH Realized P/L Ratio, 365) (green)
• Loss Momentum = -1 x sma(STH Realized L/P Ratio, 7) / sma(STH Realized L/P Ratio, 365) (red)
• Momentum Oscillator = Profit Momentum / (Profit Momentum + |Loss Momentum|) x 2 - 1 (black), with positive momentum shifts shaded green and negative shifts shaded red

Interpretation. 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 coin's 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.

Notes. Built from Entity-Adjusted STH Realized Profit and Entity-Adjusted STH Realized Loss. The underlying ratio is charted in Short-Term Holder Realized Profit / Loss Ratio; the Long-Term Holder counterpart is Long-Term Holder Realized Profit / Loss Ratio Momentum.