Bitcoin Bull Run Still too early to call, warns this quant

A quant has warned that a Bitcoin bull market may still be too early to call, as this chain indicator is yet to meet the right conditions.

Bitcoin long-term holder SOPR (SMA 14) has still not crossed above 1

According to an analyst in a CryptoQuant post, the recent rise in the BTC price may just be a bull trap. The relevant indicator here is the “Spent Output Profit Ratio”, which tells us whether the average investor is selling Bitcoin at a profit or a loss right now.

When the value of this metric is less than 1, it means that the overall market is realizing some losses with its sales at the moment. On the other hand, values ​​above the threshold suggest that the average holder is moving coins with a net profit at the moment.

At SOPR exactly equal to 1, the profit realized in the market is equal to the losses, which suggests that the investors as a whole can be thought to break even at this mark.

One of the two main investor groups in the BTC market is the “long-term holder” (LTH) group, which includes all investors who have held their coins since more than 155 days ago, without moving or selling them from a single wallet address.

Now, here is a chart showing the trend of the 14-day simple moving average (SMA) Bitcoin SOPR specifically for these LTHs throughout the history of the cryptocurrency:

Looks like the 14-day SMA value of the metric has seen some rise in recent days | Source: CryptoQuant

As shown in the graph above, the 14-day SMA Bitcoin LTH SOPR has been below the 1 mark since May 2022. This means that this group has been selling its coins at a loss all along.

In the chart, the quant has also marked the trend that the indicator followed during the last couple of cycles. It seems that this metric was below this level in the previous bear markets as well.

The reason why the LTHs start to sell at a loss as a bear market takes hold is that their purchase timing (155 days) then also covers the preceding bull run, which naturally had much higher entry prices.

Some of these investors who bought at the top capitulated when prices plunged in the bear market, sending SOPR into the red. However, when this capitulation is complete and the capital rotates into other investors at the lower bear market prices, the market begins to recover.

From the graph, it is clear that a breach of the 14-day SMA Bitcoin LTH SOPR above 1 (a sign that LTH is now selling at a profit) has usually led to bull runs in the past. With the recent rally, the metric has improved a bit, but the value still hasn’t touched the 1 level.

“It is still too early to call the $15.5,000 level the bottom of the bear market, as the recent impulsive rally may just be a bull trap,” the analyst warns. “It is important to pay close attention to the long-term holders’ SOPR measurement in the short term to anticipate price direction.”

BTC price

At the time of writing, Bitcoin is trading around $24,800, up 14% in the last week.

BTC continues to consolidate | Source: BTCUSD on TradingView

Featured image from Becca at Unsplash.com, Charts from TradingView.com, CryptoQuant.com