Data shows the Bitcoin Adjusted Spent Output Profit Ratio (aSOPR) is retesting the historical bull-bear junction. Will a break be found this time?
Bitcoin aSOPR Is Currently Doing Another Rest Of 1.0 Level
As per the latest weekly report from Glassnode, a successful retest here could suggest a meaningful regime shift in the BTC market. The “Spent Output Profit Ratio” (SOPR) is an indicator that tells us whether Bitcoin investors are selling their coins at a profit or at a loss right now.
When the value of this metric is greater than 1, it means the average holder in the market is moving coins at some profit currently. On the other hand, values below the threshold imply the overall market is realizing some loss at the moment. The SOPR being exactly equal to 1 naturally suggests that investors are just breaking even on their selling right now.
A modified version of this indicator is the “Adjusted SOPR” (aSOPR), which filters out all selling of coins that was done within only an hour of said coins being first acquired. The main advantage of this modification is that it removes noise from the data that wouldn’t have any noticeable impacts on the market anyways.
Now, here is a chart that shows the trend in the 7-day exponential moving average (EMA) Bitcoin aSOPR over the last couple of 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 above graph, the 7-day EMA Bitcoin aSOPR has sharply risen recently and has reached the 1 level for the first time since the pre-FTX crash. This level has been historically significant for BTC, as the crypto has often encountered resistance at it during bear market periods.
The reason behind this is the fact that the aSOPR equal to 1 line represents the break-even mark. Whenever the metric increases to this mark, it means enough holders are back in a state of neutrality that they are able to recoup their investment.
Psychologically, investors see this as getting their previously lost money “back” and hence large-scale dumping takes place here, thus providing impedance to the crypto’s price.
A successful break above this level would suggest, however, that there is enough demand in the Bitcoin market right now that holders are able to realize their profits and buyers are present to absorb this selling. Because of this, such breaks have usually led to a transition from bear to bull markets.
When bull markets take hold, the effect of the aSOPR 1 level flips, and the line instead starts providing support to the price of BTC.
At the time of writing, Bitcoin is trading around $21,200, up 23% in the last week.
Looks like the rally has come to a halt since hitting the $21,000 level | Source: BTCUSD on TradingView