On-chain data indicates that bitcoin had retested a historically relevant line just before the latest rally hit.
bitcoin Adjusted SOPR Retests 1.0 Level Ahead of Recovery
When bitcoin was falling, the cryptocurrency had fallen to a low of $60,600, which appears to have been the bottom, at least until now, given that the coin has rallied strongly since hitting the mark.
Around the time of recent low btc prices, one analyst noted in a CryptoQuant Quicktake mail that the adjusted spent production profit ratio (aSOPR) had plummeted to a value of 1 along with the decline in the asset.
The aSOPR is an on-chain indicator that tells us whether bitcoin investors are making a net profit or loss on their current sale.
This metric works by reviewing the blockchain history of each coin currently being transferred to check what price it moved at before this. If the last price was higher than the current price, selling the currency would result in a loss; Otherwise, it would be counted as making a profit.
The aSOPR can only say this, of course, assuming that both transactions involved a change of hands for the currency in question (i.e. the sale/purchase took place).
As for why aSOPR has “Adjusted” in its name, this version of the SOPR metric has been adjusted to exclude coins that were transferred within just one hour of their previous transaction.
These transfers tend to be essentially noise for the indicator, since they do not entail major consequences for the market, so they are not taken into account.
Now, here is a chart showing the trend of bitcoin's aSOPR over the past few years:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/Did-This-Bitcoin-On-Chain-Metric-Predict-Early-Recovery.png" alt="bitcoin aSOPR” width=”1280″ height=”806″ data-recalc-dims=”1″/>
The value of the metric seems to have plunged in recent days | Source: CryptoQuant
As shown in the chart above, bitcoin's aSOPR had risen to very high levels when the coin had established its new all-time high beyond the $73,000 level. This means that transactions made on the network generated large profits on average.
However, with the price decline, loss-taking also began to take hold as the aSOPR retreated towards the 1.0 level. At this value, the market as a whole barely reaches the break-even point in its sales.
“When positions are closed or panic selling is sufficient, we anticipate that the market is approaching its local bottom,” says the quant. This pattern is also visible on the chart, as important lows have formed when loss-taking has been dominant.
However, the 1.0 level itself has been a point where the cryptocurrency has sometimes found bounces. The most recent example of this trend would be the January low, which formed when aSOPR retested this mark.
btc Price
At the time of writing, bitcoin is trading at around $67,000, up 5% over the past week.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/uB4PkASR/" alt="bitcoin price chart” width=”1534″ height=”854″/>
Looks like btc has sharply rebounded in the past day | Source: BTCUSD on TradingView
Featured image by André François McKenzie on Unsplash.com, CryptoQuant.com, TradingView.com chart
