If a Bitcoin indicator is displaying a historical pattern, it could indicate that the top of this asset may not be far away.
Bitcoin SOPR Ratio Forming a Historical Top Right Now
Quicktake on CryptoQuant postAn analyst discussed a pattern relating to the SOPR ratio. The “Spent Output Profit RatioThis indicator tells you whether Bitcoin traders are currently selling at a profit.
If the value is higher than 1, this indicates that the current market is dominated by profit-selling. A metric that is below the threshold means the coin holders are moving their coins for a loss.
It is not the SOPR that is of concern in this context, but a slightly different version known as the SOPR Ratio. This name is a little confusing because SOPR contains already a “ratio,” This indicator is used to compare the SOPRs of two Bitcoin cohorts. long-term holders (LTHs), short-term holders (STHs).
This investor group is responsible for dividing the BTC markets into two groups based upon the time spent holding the coins. 155-days are the cutoff date between these two. STHs refer to those who have purchased BTC within the past 150 days. LTHs represent those who hold coins beyond this timeframe.
This chart shows the historical trend of the Bitcoin SOPR Rate based on the moving average (7-day MA) over time:
Recently, the value of 7-day MA for the metric appears to have moved downwards | Source: CryptoQuant
In the graph shown above, the 7 day MA Bitcoin SOPR ratio had been rising throughout 2023 and into early 2024. But recently, it has reached its peak and reversed course. When the SOPR ratio is greater than 1, this means that the LTHs are taking more profits than STHs.
These diamond investors began harvesting their gains as BTC was observing its rally, and approaching a brand new All-Time High (ATH). These investors began to take profits at the peak of price. Their profit-selling rate has dropped since then. However, they still have a higher gain than STHs.
This pattern is repeated in different periods of asset history. The peak LTH profits have been declining over time, but it is still the case that each cycle’s top coincided with the top of the asset’s price.
It’s quite possible, as the quant has indicated in his line, that the most recent peak of this metric was in fact the top of the cycle. The line is only a guideline, and assumes that the trend of decreasing returns for the indicator continues to be true.
The peak could still be above the current level, but lower than that of the previous cycle, and still in line with Bitcoin’s historical pattern.
The fact that SOPR has reached a peak could be considered a short-term bearish sign.
BTC Price
Bitcoin is making a gradual recovery in the last couple of days, with its price now rising above $66,100.
The price of this asset seems to have been rising over the past few days. Source:| Source: BTCUSD on TradingView
Featured images from Maxim Hopman at Unsplash.com and CryptoQuant.com. Charts from TradingView.com
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