Bitcoin’s on-chain profitability has recovered strongly from its March lows, but analyst Axel Adler Jr. says the market still lacks stronger behavioral confirmation that a lasting reversal is underway.
In his “Bitcoin Morning Brief” on May 19, Adler highlighted a mixed pattern between two closely watched on-chain indicators: Bitcoin Supply Percentage of Profits and Short-Term Holder SOPR. The first indicator shows a significant structural recovery. The second still suggests that recent buyers are not yet making sustainable profits with enough confidence to validate their decision.
“Profit supply has recovered after the capitulation phase, but short-term holders are still not realizing sustainable profits,” Adler wrote. “There is still no behavioral confirmation of a reversal.”
Bitcoin Approaches Critical Zone as Short-Term Holders Flash Warning
According to Adler data, Bitcoin’s profit percentage on a seven-day simple moving average increased from a low of 53.6% in March to 63.3% as of May 18. The recovery indicates that a larger share of Bitcoin in circulation now has a lower on-chain cost than the current market price, marking a marked improvement from the capitulation phase earlier this year.
This approach, however, remains incomplete according to the analyst’s framework. Adler noted that the current figure is still about 10 percentage points below January levels, when the indicator was above 72%, and remains below the historical cumulative average of about 76.9%. According to him, this keeps Bitcoin in a recovery phase rather than a fully normalized profitability regime.
“The current level remains below the historical cumulative average of approximately 76.9%,” Adler wrote. “This means that the market is still in a recovery phase. A return above 70% while current price dynamics continue would be the first signal of normalization of the supply structure.”
The weakest signal comes from short-term holders. Adler said Bitcoin’s STH-SOPR SMA-7D recovered from a capitulation zone below 0.97 earlier this year, but failed to decisively hold above the neutral threshold of 1.0. As of May 18, the indicator stood at 0.9994, slightly below the neutral point, with Bitcoin near $76,900.
This is important because STH-SOPR tracks whether coins moved by short-term holders, generally defined as coins held for less than 155 days, are sold for a profit or a loss. A reading below 1.0 indicates that these market participants are selling at a loss on average. For Adler, this makes the recent move below the threshold more important than the overall improvement in the overall profitability of the offering.
“STH-SOPR SMA-7D hit the cycle low in early February 2026 at 0.967,” Adler wrote. “This was a clear capitulation zone, when short-term holders were largely making losses. The recovery that followed was gradual.”
The indicator stabilized between 1.001 and 1.009 in April as Bitcoin surpassed the $75,000 to $80,000 zone. But the decline to 0.9994 marked the first return below 1.0 after about two weeks above the threshold, the report said. Adler presented this as a warning that the recovery still depends heavily on prices remaining within a narrow support band.
“The key question now is whether STH-SOPR can hold above 1.0 again or continue to fall with price,” he wrote. “Losing the 1.0 level with a price below $76,000 would increase the risk of retesting the March lows in terms of supply and profit.”
For now, Adler described the market position as neutral with a cautious bias. The critical zone is between $76,000 and $77,000, which he believes is enough to push STH-SOPR back above 1.0 if buyers defend it. Stronger confirmation would require STH-SOPR to remain above 1.0 for five to seven trading days, while Bitcoin sustains above $78,000 to $80,000 as the profit offer heads towards the 68% to 70% range.
The pessimistic scenario is more immediate. Adler flagged a potential pullback from $73,000 to $74,000 as the main risk, saying the move could push STH-SOPR back to the 0.98-0.99 area and block the improvement in profit supply.
At press time, BTC was trading at $77,015.
Featured image created with DALL.E, chart from TradingView.com
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