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The data shows that the Bitcoin Adjusted Spent Output Profit Ratio (aSOPR) is retesting the historic bull-bear junction. Will a break be found this time?

Bitcoin aSOPR is currently making another rest of the 1.0 level

According to the latest weekly report from glass knot, a successful retest here could suggest a significant regime shift in the BTC market. The “Spent production 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 with some profit. On the other hand, values ​​below the threshold imply that the overall market is currently making some loss. SOPR being exactly 1 naturally suggests that investors are just breaking even on their sales right now.

A modified version of this indicator is the “Adjusted RPSO(aSOPR), which filters out all coin sales made within an hour of first acquiring said coins. The main benefit of this change is that it removes noise from the data which would have no noticeable impact anyway on the market.

Now, here is a chart that shows the trend of the 7-day exponential moving average (EMA) Bitcoin aSOPR over the past two years:

Bitcoin aSOPR

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 7-day aSOPR Bitcoin EMA has risen sharply recently and reached level 1 for the first time since the pre-FTX crash. This level has been historically significant for BTC, as the crypto has often encountered resistance during bear market periods.

The reason behind this is the fact that aSOPR equal to 1 line represents the breakeven point. Each time the metric reaches this mark, it means that enough holders are back in a neutral state to be able to recoup their investment.

Psychologically, investors see this as getting back their previously lost money and as a result, large-scale dumping takes place here, which hinders the price of crypto.

A successful break above this level, however, would suggest that there is currently enough demand in the Bitcoin market for holders to be able to take profits and buyers to be present to absorb this selloff. For this reason, such breakouts have generally led to a transition from bearish to bullish markets.

When bull markets sets in, the effect of the aSOPR 1 level flips, and the line instead begins to provide support for the price of BTC.

BTC price

As of this writing, Bitcoin is trading around $21,200, up 23% in the past week.

Bitcoin Price Chart

Looks like the rally has come to a halt since hitting the $21,000 level | Source: BTCUSD on TradingView

Featured image of Kanchanara from Unsplash.com, charts from TradingView.com, Glassnode.com



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