Is bitcoin’s bottom there? This is what a SOPR metric suggests

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A quant explained using past trends in the Bitcoin Adjusted Spent Production Profit Ratio (aSOPR) whether the current cycle has already met all minimum conditions.

Bitcoin aSOPR EMAs Approach Golden Cross

As one analyst explained in a post on CryptoQuant, aSOPR EMAs are looking to form a golden cross soon. The “Spent Output Profit Ratio” (SOPR) indicates whether the average Bitcoin investor is selling with a profit or a loss at the moment.

“Adjusted SOPR” (aSOPR) is a modified version of this metric that excludes from the data all sales made within one hour of the coins first being purchased. The advantage of doing it this way is that these short-term trades make noise in the data and therefore have no significant market implications.

When the value of this indicator is above 1, it means that the holders are selling coins with some profit at the moment. On the other hand, values ​​below the threshold suggest that the overall market is making some loss at the moment.

Naturally, aSOPR being exactly equal to 1 implies that investors are just breaking even from their current sales. Now, here is a chart that shows the trend of Bitcoin aSOPR, along with its 50- and 100-day exponential moving averages (EMAs) during the 2014-2015 and 2018-2019 bear markets:

Metric Trends During Previous Bear Market Lows | Source: CryptoQuant

As the chart above shows, the quant has marked the relevant areas for the indicator in the previous two cycles. It appears that aSOPR reached the lowest values ​​below one and then followed a general upward trend as the price of Bitcoin itself bottomed out in both cycles. The indicator reaching lows below a level like this suggests that investors then capitulated sharply, which detoxified the market from weak hands and thus helped the price to bottom out.

Additionally, in both of these bear markets, the 100-day EMA dropped to the same low (represented by the lower dotted line in the chart) and rebounded as this bottoming process took place. It also looks like a return to an uptrend started by a golden cross of the two EMAs, with the 50-day crossover above the 100-day.

Now, here’s a chart that shows what aSOPR and its EMAs look like in the current cycle so far:

The value of the metric seems to have climbed recently | Source: CryptoQuant

The chart shows that the same pattern of Bitcoin aSOPR forming a bottom and then catching up to an overall uptrend has already appeared for the current cycle. Both EMAs are also looking on track to complete the golden cross soon.

However, the analyst pointed out that the 100-day EMA has yet to touch the dotted level of this cycle. The period so far in the recovery of the metric (the uptrend from the bottom) has also only been about half of what previous cycles have seen (the yellow bars).

Based on this, the quant believes that there could still be a further drop in the price, before these conditions are met and the true bottom is reached.

BTC price

As of this writing, Bitcoin is trading around $17,200, up 3% in the past week.

Looks like BTC has risen sharply | Source: BTCUSD on TradingView

Featured Image by Dmitry Demidko from Unsplash.com, Charts from TradingView.com, CryptoQuant.com

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