A notable trend emerging in Bitcoin‘s on-chain data might indicate that the peak for this asset has arrived or is imminent based on historical precedent.
Bitcoin SOPR Ratio Is Forming A Historical Top Pattern Right Now
An analyst in a recent CryptoQuant Quicktake piece has explored a trend connected to the SOPR Rate, which is an essential metric indicating if Bitcoin investors are currently realizing profits or incurring losses when selling their coins.
If the metric exceeds 1, it indicates that more coins are being sold for a profit than bought in the current market situation. Conversely, when the metric falls below the set threshold, it signifies that on average, traders are incurring a net loss while transferring their coins.
When discussing the current subject, it’s not the raw SOPR (Spent Output Price Ratio) that holds significance; instead, we focus on a variant called the SOPR Ratio. Although the name might be misleading as SOPR inherently involves a ratio, this particular ratio signifies the comparison between two groups of Bitcoin holders: long-term investors and short-term traders.
Two primary categories of Bitcoin investors exist, determined by the length of their holding period. Investors who purchased within the last 155 days fall under the Short-Term Holders (STHs), while Long-Term Holders (LTHs) are those who have held coins for more than 155 days.
Here’s a chart displaying the development of Bitcoin’s 7-day Moving Average of the SOPR Ratio throughout its history:
In the provided graph, the Bitcoin 7-day Moving Average SOPR Ratio had been climbing since the beginning of 2023. However, it has now reached a peak and started to decrease. When the SOPR Ratio is above 1, long-term holders (LTHs) are selling more coins for profit than short-term holders (STHs).
It seems that as Bitcoins price rose and reached a new record high (ATH), these dedicated investors started cashing out some of their earnings from their extended holding period. Once the price hit a new ATH, these investors engaged in heavy profit-taking. Since then, their profit selling has decreased, but they are still reaping significantly higher profits than short-term holders.
In the chart, the analyst points out that this pattern has recurred at various stages in the asset’s past. Although the size of the profit-taking peaks among long-term holders (LTHs) has decreased over the cycles, it remains noteworthy that the metric’s highest points have aligned with price peaks during each cycle.
According to the quant’s analysis, the recent high in the metric could be the peak for this cycle. However, this assumption relies on the accuracy of the decreasing trend identified in the indicator.
The peak of Bitcoin’s price could be higher than its current level but lower than the peak of the previous cycle, which aligns with the historical trend of Bitcoin’s price fluctuations.
Regardless of the situation, it’s important to note that the SOPR ratio reaching what seems to be a peak might indicate a bearish trend in the near future based on this single data point.
BTC Price
Over the past few days, Bitcoin has experienced a gradual rebound. Currently, its value is once again exceeding $66,100.
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2024-04-23 21:04