Bitcoin SOPR jumps into profit zone, what does it mean?

On-chain data suggests that the Bitcoin Spending Output Profit Ratio (SOPR) is back in profit territory with the latest rally above $30,000.

Bitcoin SOPR successfully retests 1.0 support line

According to data from on-chain analytics firm glassnode, investors are now selling their coins at a profit. “SOPR” is an indicator that tells us whether take profits or losses are currently dominant in the bitcoin market.

When the value of this metric is greater than 1.0, it means that the gains investors are likely to make are greater than the losses they are currently incurring. On the other hand, the indicator’s values ​​under this sign show that the market as a whole is trading/selling coins at a loss.

A SOPR equal to exactly 1.0 naturally suggests that the average investor is breaking even on their sales at this point, since the total amount of profits in the market equals losses.

Now, here is a chart that shows the trend in bitcoin SOPR over the past year:

Looks like the value of the metric seems to have shot up in recent days | Source: Glassnode on Twitter

Note that the version of the SOPR being used here is “entity-adjusted”, meaning that it only takes into account transactions made between individual entities on the network, not all individual wallets.

An “entity” here refers to a single address or collection of addresses that Glassnode has determined to belong to a single investor. As transfers where a holder moves coins to their separate wallet are not actually sales, they are not relevant to the SOPR, and therefore, removing them from the data makes the indicator more accurate.

As you can see in the graph above, the unit-adjusted SOPR has mostly been at values ​​above 1.0 during the past few months, a trend that makes sense as the asset has seen a run-up during this period, leading to It is bound to attract the attention of investors. in significant profit.

However, in March, the indicator broke away from this profit-taking trend, as there was a significant decline in the price of bitcoin. However, this divergence did not last very long, as the metric returned to values ​​above 1.0 when the rally resumed.

Historically, the transition line between these two zones, ie the 1.0 level, has had an interesting relationship with price. During bearish trends, this line has proved to be a resistance point for the coin, while in bullish trends, it often acts as a support.

Recently, as bitcoin struggled, the SOPR again saw a slight dip below the 1.0 level, although the divergence was significantly smaller than in the March example.

As has happened many times in the past, it appears that the 1.0 retest has provided a boost to BTC this time as well, as the cryptocurrency surged towards the $30,000 mark.

With this rebound, the Bitcoin SOPR has risen above 1.0, which means investors are once again taking huge profits.

btc price

At the time of writing, bitcoin is trading around $30,100, up 17% over the past week.

BTC has slowed down since the sharp jump | Source: BTCUSD on TradingView

Featured Image from Kanchanara on Unsplash.com, Chart from Tradingview.com, Glassnode.com