Data shows that the Bitcoin Adjusted Spent Output Profit Ratio (aSOPR) is retesting the historic bull-bear intersection. Will a break be found this time?
Bitcoin aSOPR is currently doing a 1.0 level rest
According to the latest weekly report from Glasnode, a successful retest here could indicate a significant regime shift in the BTC market. The “Spent output profit ratio(SOPR) is an indicator that tells us whether Bitcoin investors are currently selling their coins at a profit or a loss.
When the value of this metric is greater than 1, it means that the average holder in the market is currently moving coins with some profit. On the other hand, values below the threshold imply that the overall market is currently experiencing some loss. Of course, if the SOPR is exactly equal to 1, this suggests that investors are just breaking even with their sales right now.
A modified version of this indicator is the “SOPR modified(aSOPR), which filters all coin sales made within just one hour of the coins being first acquired. The main benefit of this adjustment is that it removes noise from the data that would have no noticeable impact on the market anyway.
Now, here is a chart showing the trend in the 7-day exponential moving average (EMA) of Bitcoin aSOPR over the past few years:
The 7-day EMA value of the metric seems to have gone up in recent days | Source: Glassnode's The Week Onchain - Week 3, 2023
As can be seen in the chart above, the 7-day EMA Bitcoin aSOPR has been surging recently, hitting the 1 level for the first time since the pre-FTX crash. This level has historically been important for BTC, as the crypto often encountered resistance during bear market periods.
The reason behind this is the fact that the aSOPR equal to 1 line represents the break-even point. Whenever the metric rises to this figure, it means enough holders are back in a state of neutrality to recoup their investment.
Psychologically, investors see this as “getting back” their previously lost money, which is why large-scale dumping takes place here, stunting the price of the cryptocurrency.
However, a successful break above this level would suggest that there is sufficient demand in the Bitcoin market right now for holders to realize their gains and buyers to be there to absorb this sale. Because of this, such interruptions have usually led to a transition from bear markets to bull markets.
When bull markets hold, the effect of the aSOPR 1 level flips and the line starts to provide support to the price of BTC instead.
BTC price
At the time of writing, Bitcoin is trading around $21,200, up 23% over the past week.
Looks like the rally has come to a halt since hitting the $21,000 level | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com