Data shows that Bitcoin’s Adjusted Spent Out Profit Rate (aSOPR) is retesting the historic bullish-bearish cross. Will he find a break this time?
Bitcoin aSOPR is currently making another break from level 1.0
According to the latest weekly report of glass node, a successful retest here could suggest a significant regime change in the BTC market. He “Production Spent Profit Ratio” (SOPR) is an indicator that tells us if Bitcoin investors are selling their coins at a profit or a loss right now.
When the value of this metric is greater than 1, it means that the average holder in the market is currently moving coins at some profit. On the other hand, values below the threshold imply that the broader market is experiencing some losses at the moment. The fact that the SOPR is exactly equal to 1 naturally suggests that investors are only breaking even on their selling at the moment.
A modified version of this indicator is the “adjusted SOPR” (aSOPR), which filters all coin sales that took place in just one hour since the coins were first purchased. The main advantage of this modification is that it removes noise from the data that would not have any noticeable impact on the market anyway.
Now, here is a chart showing the trend in the Bitcoin aSOPR 7-day EMA over the past two 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 shown in the chart above, the Bitcoin aSOPR 7-day EMA has risen sharply recently, reaching level 1 for the first time since the previous drop by FTX. This level has historically been significant for BTC, as the crypto has often found resistance during bear market periods.
The reason behind this is the fact that the aSOPR equal to 1 line represents the breakeven mark. Every time the metric increases to this mark, it means that enough cardholders are back in a neutral state that they can recoup their investment.
Psychologically, investors see this as “getting back” their previously lost money, and thus large-scale dumping occurs here, hampering the price of crypto.
However, a successful break above this level would suggest that there is enough demand in the Bitcoin market right now for holders to be able to take their profits and buyers to be around to soak up this selling. Because of this, such breakouts have generally led to a transition from bear to bull markets.
When bull markets takes hold, the effect of the aSOPR 1 level reverses, and instead the line begins to support the BTC price.
Bitcoin price
At the time of writing, Bitcoin is trading around $21,200, an increase of 23% in the last 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
