On-chain data shows that bitcoin‘s SOPR has yet to reach the high levels that have been associated with heated bull market phases in the past.
bitcoin SOPR has only seen slightly positive values recently
In a quick shot from CryptoQuant crypto-markets-are-driven-by-the-psychology-of-market-participants” target=”_blank” rel=”nofollow”>mail, an analyst explained how market psychology has driven the price of btc over the past few years. The on-chain indicator that best represents bitcoin trader psychology according to quant is the “spent production profit ratio” (SOPR).
Basically, the SOPR tells us whether btc investors are selling their coins (or more precisely, transferring them on the blockchain) for a net amount of profit or loss.
When the indicator has a value greater than 1, it means that the average holder in the sector is selling their coins at a certain profit right now. On the other hand, a value below this threshold implies that sales at a loss are dominant among the participants.
Naturally, when the SOPR has a value exactly equal to 1, it can be assumed that the overall market is simply breaking even on its sales, since the amount of profits being made exactly cancels out the losses.
Now, here is a chart showing the trend of bitcoin‘s SOPR over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/11/Bitcoin-Bull-Run-Is-Just-Beginning-According-to-This-Metric.png" alt="bitcoin SOPR” width=”1280″ height=”711″ loading=”lazy” data-recalc-dims=”1″/>
Looks like the value of the metric has been slightly positive in recent weeks | Source: crypto-markets-are-driven-by-the-psychology-of-market-participants" target="_blank" rel="nofollow">CryptoQuant
In the chart above, the analyst has marked the pattern that the bitcoin SOPR has followed in recent years. During the 2018 bear market, the btc SOPR fell to fairly low values below 1 after the November 2018 crash. Coinciding with these lows in the metric, the price also found its bottom.
In the 2022 bear market, btc investors remained quietly in the red as they engaged in only a relatively low amount of loss selling until the FTX crash occurred and holders finally capitulated to a significant degree.
So far, it appears that the low after the FTX crash was in fact the low of the current cycle, as btc has only risen and doubled in value since then. The pattern of this fund has also been consistent with that of the 2018 bear market.
Between these two major lows, there was also a large-scale capitulation event in 2020, but this drop was mainly an anomaly caused by the unexpected emergence of the COVID-19 pandemic.
From the chart you can see that the trend during rallies has generally been the opposite: investors start selling at large profits and once profit taking reaches extreme levels, the top is reached.
Earlier this year, btc SOPR hit high levels when btc hit its local high in April. However, since then, the indicator has remained relatively calm, with some slight profit taking after the last leg of the rally.
“There will be many corrections and declines in the current market until it reaches the peak of the bull market, but from a psychological perspective, it still seems that there is enough time until the second half of the bull market,” thinks the quant.
btc Price
bitcoin had recorded a drop below the $37,000 level over the past day, but the asset has since recovered and is now simply floating above the mark.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/RNldN9cu/" alt="bitcoin price chart” width=”1534″ height=”869″/>
The price of the asset appears to have seen some drawdown recently | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, Charts from TradingView.com, CryptoQuant.com
