Post-Fed Rally Fades Into Selling Pressure on Bitcoin

Last week, Bitcoin surged past $117,000 after the U.S. Federal Reserve announced a rate cut. However, renewed selling pressure quickly emerged, dragging the leading cryptocurrency down to around $112,000 at the start of this week.

Adding to investor unease, history shows that September has often been a weak month for crypto markets, with past cycles delivering sharper corrections during this period.

1. SOPR Signal: Profitability on the Decline

Wedson highlighted the Spent Output Profit Ratio (SOPR) as the first red flag. This on-chain metric measures whether transactions are being executed at a profit or a loss:

• Above 1: sellers are in profit

• Below 1: sellers are at a loss

Currently, SOPR remains above 1, yet its downward trend indicates weakening profitability on the blockchain.

“The SOPR signal is an excellent tool to detect when profitability is starting to fade. Never before in Bitcoin’s history have investors accumulated this late in the cycle and at such elevated price levels,” Wedson explained.

2. Short-Term Holder Risk Zone for Bitcoin

The second indicator Wedson flagged is the realized price for short-term holders (STH), which now stands near $111,400.

Should Bitcoin dip below this threshold, it could trigger stop-loss liquidations from short-term investors, potentially accelerating a sell-off.

3. Sharpe Ratio Weakens Despite Higher Prices

Finally, Wedson pointed to the Sharpe ratio, which measures risk-adjusted returns. Despite Bitcoin’s higher price levels compared to previous cycles, the ratio has declined.

This suggests that the reward for risk taken is diminishing, limiting Bitcoin’s overall profit potential in the current environment.

Could Altcoins Steal the Spotlight?

While these three indicators paint a bearish picture for Bitcoin, Wedson emphasized that market enthusiasm might not vanish altogether. Instead, he argued that a renewed wave of investor interest could shift toward altcoins, rather than being driven by Bitcoin itself.

*This content is not an investment idea.

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Strong Prices, Weak Profits

Although Bitcoin continues to trade at relatively high levels, miners’ earnings remain far below the record highs seen during the 2017 and 2021 bull runs.

A major factor behind this is the surging hash rate, which has forced mining companies to invest heavily in more advanced and expensive hardware. At the same time, on-chain transaction volumes have stayed muted since 2022, limiting revenue growth and intensifying the financial strain across the industry.

Measuring Mining Profitability: The MEI Indicator

To better track the health of the mining economy, Wedson introduced a new tool called the Mining Equilibrium Index (MEI).

The MEI is calculated by dividing the 30-day average revenue-to-hash ratio by the 365-day average.

• Above 1.0 Indicates favorable conditions

• Below 0.5 Linked to stress, capitulation, or hash rate corrections

Based on the latest figures, the MEI currently stands at 1.06. While this is comfortably above the danger zone of 0.5, it is still a long way from the 2.5 peaks reached in 2017 and 2021.

The Key Question for 2025: Security vs. Costs

According to Wedson, the most pressing issue for 2025 is whether mining companies can maintain the security of the Bitcoin network amid rising competition and escalating operational expenses.

Costs related to labor, electricity, and infrastructure continue to climb, squeezing profitability further. If mining revenues fail to keep up, Wedson warned that miners may be forced to liquidate part of their Bitcoin reserves to stay afloat.

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