Bitcoin SOPR Plunges, Why This Could Be Bullish
04 April 2023 - 3:30AM
NEWSBTC
On-chain data shows the Bitcoin Spent Output Profit Ratio (SOPR)
has plunged recently; here’s why this may be bullish for the price.
Bitcoin SOPR Observed A Deep Plunge In Recent Days As an analyst in
a CryptoQuant post pointed out, many investors have sold at a loss
recently. The “SOPR” is an indicator that tells us whether
investors are currently selling at a loss or a profit. This metric
looks at the on-chain history of each coin being sold or moved to
see the price at which it was previously transferred. If this last
selling price for any coin was less than the price it’s being sold,
then the investor realizes a profit with the sale. Similarly, the
coin’s being sold at a loss in the opposite scenario. When the
value of this indicator is greater than 1, it means the number of
profits being realized is greater than the losses right now. This
suggests that the average investor is moving coins at a profit. On
the other hand, the metric having a value below this threshold
implies loss realization is more dominant in the market. Naturally,
the SOPR being equal to 1 suggests the holders break even on their
selling. Related Reading: Bitcoin Bear Market Over? This Historic
On-Chain Signal Suggests So Now, here is a chart that shows the
trend in the Bitcoin SOPR over the last few years: The value of the
metric seems to have dipped quite low recently | Source:
CryptoQuant As displayed in the above graph, the Bitcoin SOPR has
been above 1 for much of the year 2023 so far. This means that the
average investor has been selling at a profit during this period.
This trend makes sense, as the asset’s price has observed some
strong bullish momentum in the last few months. Rallies like these
naturally entice investors to harvest their gains, hence why profit
selling spikes during such price surges. However, the indicator saw
a sharp plunge a couple of days back, and its value dipped below
the 1 level. This suggests that some holders have just realized a
large number of losses. In the chart, the quant has marked the
points where similar downward spikes in the metric were observed
during the last few years. Interestingly, whenever the indicator
has sharply plummeted, the price has bottomed out and followed up
with a rise. Such spikes in the Bitcoin SOPR are usually a sign of
capitulation from the loss holders. When these investors finally
sell, coins move toward holders with stronger convictions, and the
selling pressure starts getting exhausted. This is likely why the
price bottoms out close to such capitulation events. Earlier in the
current rally, when BTC had also plunged below the $20,000 mark,
the SOPR saw such a spike. The latest stretch in the rally, which
has taken the price above $28,000, followed it. Related Reading:
Dogecoin Whales Bought 1.47 Billion DOGE In Q1 2023: Santiment If
this same pattern that has been seen time and time again repeats
for the latest SOPR plunge as well, then Bitcoin could feel a
bullish effect from it. However, something different about the
recent loss selling is that it has come while the price has already
been at a relatively high levels of $28,000. All the previous
instances of this trend came when the price had been facing a
bearish wind overall. It remains to be seen whether this difference
may lead to a different outcome for the price this time. BTC Price
At the time of writing, Bitcoin is trading around $28,100, up 4% in
the last week. BTC has mostly moved sideways recently | Source:
BTCUSD on TradingView Featured image from Michael Förtsch on
Unsplash.com, charts from TradingView.com, CryptoQuant.com
Mina (COIN:MINAUSD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Mina (COIN:MINAUSD)
Historical Stock Chart
From Jul 2023 to Jul 2024