Over the past week, the Bitcoin market experienced new waves of liquidations with prices dropping to around $81,000 on Thursday. Though the premier cryptocurrency has seen a slight rebound since then, bearish sentiments remain dominant with analysts expecting a potential decline to as low as $56,000. Amid this recent correction, a developing on-chain situation has reached a boiling point, putting the Bitcoin market at a critical juncture.
The Adjusted Spent Output Profit Ratio (aSOPR) is an on-chain metric used to measure whether Bitcoin investors are, on average, selling their coins at a profit or at a loss, while filtering out noise from short-term, low-value movements. In usual market trends, each new price peak is accompanied by higher conviction as investors are willing to hold longer, take profits later, and tolerate larger drawdowns because they expect even higher prices.
However, during Bitcoin’s ascent from around $40,000 in early 2024 to over $100,000, the aSOPR has shown a different pattern as observed by market analyst MorenoDV. Despite a consistent uptrend resulting in multiple price peaks, Bitcoin aSOPR established a downtrend pattern marked by lower highs and lower lows, thereby creating a puzzling market divergence.
According to MorenoDV, this development suggests that Bitcoin traders were aggressively taking profits with each rally, indicating a lack of long-term market confidence. Considering the descending profit-taking pattern, it can also be inferred that investors were satisfied with smaller and smaller gains, suggesting they were no longer convinced that upside continuation was likely.
Despite the ongoing divergence, it is still observed that aSOPR respects the general market trend with each high in its descending channel aligning with a local price top, while each retest of the lower boundary coincides with a market bottom.
Presently, the aSOPR is retesting this lower boundary, in a fear-ridden market with over 30% of market supply in a loss. Ideally, MorenoDV explains these are accumulation opportunities, especially in further consideration of the negative aSOPR.
However, the analyst warns that a decisive fall below this line could strengthen present bearish sentiments, resulting in an intense market capitulation, as an already fearful set of investors would likely initiate a sell-off. At press time, Bitcoin continues to trade around $83,819, reflecting 0.41% decline in the past day. Following the recent liquidations, the market leader is now 34% away from its all time high of around $126,100.
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