The analyst explained how Bitcoin's profit-taking appears to have ended in what was a “very healthy reset” for the market.
Bitcoin’s SOPR suggests that investors are less likely to take profits
In a new post on X, analyst Willy Wu discusses the latest trends occurring in Bitcoin's Spend Return Ratio (SOPR). SOPR is basically an on-chain indicator that shows whether Bitcoin investors overall are currently selling their coins for a profit or a loss.
If the value of this metric is greater than 1, it means that we can assume that the average holder in the sector is currently moving their coins with some net profit. On the other hand, if the indicator is negative, it means that loss realization is the main selling mode in the market.
Naturally, SOPR being exactly equal to 1 suggests that the total profit realized is exactly equal to the current loss, so the investor can sell just to break even. It means that you have reached it.
Here is a graph showing the trend of Bitcoin SOPR over the past few years.
The value of the metric seems to have been neutral in recent days | Source: @woonomic on X
As can be seen from the graph above, Bitcoin's SOPR spiked to a very positive level before the price of the cryptocurrency was observed rising towards a new all-time high (ATH). I was there.
This may suggest that investors were actively participating in profit taking during this trade. The chart shows that such a trend was also observed around the start of the 2021 bull market.
Due to the integration, the asset will age since ATH and the value of the indicator will also be cooled down. As Woo highlighted on the chart, the indicator is currently approaching the neutral mark.
Two months after profit-taking peaked, investors' appetite for reaping profits may have finally subsided. Analysts say this is a very healthy reset for cryptocurrencies, especially as capital inflows into cryptocurrencies are accelerating once again.
Looks like the indicator has gone through a turnaround recently | Source: @woonomic
From this graph, it is clear that Bitcoin network flows were on an overall downward trajectory during the early years of consolidation, but recently capital injections into Bitcoin have been on the rise again. .
This is a similar trend to that observed earlier this year during the post-approval crash of spot exchange-traded funds (ETFs). The upturn in capital inflows at that time led to the rally that took the cryptocurrency to its current ATH.
BTC price
Yesterday, Bitcoin fell below $66,000, raising concerns that the recovery momentum has already faded. However, this decline only lasted for a short time as the coin climbed back above $67,000 today.
The price of the asset appears to have been consolidating sideways over the last few days | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, woocharts.com, Charts on TradingView.com
