The on-chain data shows that Bitcoin holders sold at significant losses at previous lows, suggesting that the final capitulation of the cycle may be here.
Bitcoin 7-Day MA aSOPR has fallen sharply recently
As one analyst pointed out in a CryptoQuant PublishBTC market players may be on the verge of surrender.
The relevant indicator here is the “Spent production profit ratio(SOPR), which 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 is currently moving his coins profitably.
On the other hand, the indicator having values below the threshold suggests that the market as a whole is currently making some loss.
Naturally, the SOPR having values exactly equal to 1 implies that investors are just breaking even on their sale.
“Adjusted SOPR” (aSOPR) is a modified version of this metric that does not take into account the movement of all coins that have been sold within an hour of being purchased. This removes noise from the data which will not have a significant impact on the market.
Now, here is a chart that shows the trend of Bitcoin aSOPR 7-day moving average over the past few years:
Looks like the 7-day MA value of the metric has declined in recent days | Source: CryptoQuant
As you can see in the chart above, the 7-day Bitcoin MA aSOPR recently dipped deep below the 1 mark. This means that investors are now selling at big losses.
The current levels of the indicator are the same as those seen during the bear market trough of 2018-19, as well as during the COVID crash.
The reason such deep sellouts have usually coincided with major lows in crypto price is that they signify an exhaustion of selling pressure as weak holders drop and abandon their holdings at a loss.
Stronger hands then buy these coins and accumulate at cheap prices, leading to a more positive outcome in the long run.
If the current capitulation is truly the last, then a bottom may be in sight for bitcoin. However, the uptrend would not immediately follow the coin; the short-term result should still be bearish.
At the time of writing, The price of bitcoin is floating around $16,100, down 5% in the past week.
The value of the crypto seems to have gone down during the past day | Source: BTCUSD on TradingView
Featured image from 愚木混株 cdd20 on Unsplash.com, charts from TradingView.com, CryptoQuant.com