On-chain data shows that Bitcoin holders have sold at the level of previous bottoms at large losses, suggesting the final capitulation for the cycle may be here.
Bitcoin 7-day MA aSOPR has fallen sharply recently
As noted by an analyst in a CryptoQuant aftercan the BTC market participants come close to surrender.
The relevant indicator here is the “Spent output profit ratio(SOPR), telling us whether Bitcoin investors are currently selling their coins at a profit or loss.
When the value of this metric is greater than 1, it means that the average holder is currently moving their coins at a profit.
On the other hand, the indicator with values below the threshold suggests that the market as a whole is currently experiencing some loss.
Of course, with values exactly equal to 1, the SOPR implies that the investors are simply breaking even with their sales.
The “Adjusted SOPR” (aSOPR) is a modified version of this metric that does not account for the movement of all those coins that are sold within an hour of purchase. This helps remove noise from the data that will not have a significant impact on the market.
Now, here’s a chart showing the trend in the Bitcoin aSOPR 7-day moving average over the past few years:
Looks like the 7-day MA value of the metric has declined in recent days | Source: CryptoQuant
As you can see in the chart above, the 7-day MA Bitcoin aSOPR recently took a deep dive below the 1 mark. This means that investors are now selling at large losses.
The indicator’s current levels are the same as those observed during the 2018-2019 bear market bottom, as well as during the COVID crash.
The reason such deep capitulations usually coincided with major bottoms in the cryptocurrency’s price is that they signify an exhaustion of selling pressure as the weak holders give up and dump their holdings at a loss.
Stronger hands then buy up these coins and accumulate them at low prices, leading to a more positive long-term outcome.
If the current capitulation really is the last, then a bottom possibly in sight for Bitcoin. However, the bullish trend would not immediately follow the coin; the near-term outcome is likely to still be bearish.
BTC price
At the moment of writing, The price of Bitcoin floating around $16.1k, down 5% over the past week.
The value of the crypto seems to have gone down during the past day | Source: BTCUSD on TradingView
Featured image from 愚木混株 cdd20 on Unsplash.com, charts from TradingView.com, CryptoQuant.com