Bitcoin Close To Decisive Retest: Which Of These Historical Patterns Will Be Repeated?

On-chain data shows that the bitcoin indicator is currently close to a crucial retest that could decide where the cryptocurrency goes from here.

Which pattern will bitcoin follow next: 2016 or 2019?

As pointed out by an analyst at CryptoQuant PostBTC is moving closer to the SOPR baseline for short term holders. The “spent output profit ratio” (SOPR) is an indicator that tells us whether bitcoin investors are currently selling their coins at a profit or taking them at a loss.

When this metric has a value greater than 1, it means that the average holder in the market is currently receiving some profit from his sales. On the other hand, values ​​below this range suggest that bearishness is the dominant force in the market at the moment.

Naturally, SOPR being exactly equal to the 1 baseline means that the total amount of profits received is exactly canceling out the amount of losses because the market is completely neutral.

This SOPR is for the entire bitcoin market, but in the context of the current discussion, the relevant version of the metric is for only one segment of the market: “short-term holders” (STH).

The STH group includes all investors who purchased their coins less than 155 days ago. This group generally includes the weak hands of the market, who can easily react to market volatility.

Now, here is a chart that shows the trend of the 90-day and 365-day moving averages (MAs) of the Bitcoin STH SOPR over the years:

Looks like both the metrics have been above the baseline in recent days: Source: CryptoQuant

As shown in the graph above, the 90-day MA of the Bitcoin STH SOPR (colored in yellow) broke above the baseline when this rally first started around the start of the year.

This breakout suggested a change in the direction of profit selling for these investors, something that has historically been seen in all previous major rallies in the cryptocurrency.

With bitcoin’s latest rally above the $30,000 mark, the indicator’s 365-day MA (highlighted in blue) has also managed to climb above this mark.

However, this is happening, the 90-day moving average is actually moving down and is now about to move below the 365-day moving average as it approaches the 1 baseline.

In the chart, the quant has marked two previous instances where a similar trend formed for the asset. The metric appears to have found support at the break-even mark in 2016 when the 90-day MA re-tested the 1 mark after taking shape of a similar structure. This rally kept bitcoin going and eventually the coin turned into a bullish market.

However, in 2019, a retest of the 90-day MA STH SOPR failed and the bearish trend once again took hold of the coin. It won’t happen until 160 days later that the bullish sentiment returns and a rally occurs.

Since the current bitcoin market seems to be in a similar position to these two historical events, it is possible that it could follow either one of them. It remains to be seen which of these patterns the asset can display this time around.

btc price

At the time of writing, bitcoin is trading around $30,300, down 1% over the past week.

BTC has surged during the past day | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com Charts from Tradingview.com Cryptoquant.com