Data from this network metric is currently forming a pattern that may suggest that the “buy the dip” mentality is making a comeback in the bitcoin market.
Bitcoin aSOPR (7-day EMA) bounced off the first line recently
According to the latest weekly report from glass knotaSOPR recently retested Line 1. The Adjusted Spent Output Profit Ratio (aSOPR) is a metric that measures the ratio between profits and losses that are being realized in the bitcoin market right now.
The metric is “adjusted” in the name because it filters out all token sales that happened only one hour after the last one. This adjustment helps remove noise from the data that would not have long-term effects on the market.
When the indicator value is greater than 1, it means that the average investor is currently selling coins at a profit. On the other hand, readings below the threshold suggest that the market as a whole is currently in a loss.
Naturally, an aSOPR value of exactly 1 means that the holders are breaking even on the sale right now, since the profit made exactly offsets the loss.
Now here is a chart showing the trend of the Bitcoin aSOPR 7-day exponential moving average (EMA) over the past year:
Looks like the 7-day EMA value of the metric has gone up in recent days | Source: Glassnode's The Week Onchain - Week 8, 2023
As shown in the chart above, the Bitcoin aSOPR 7-day EMA was below the 1 level during the bear market, but with the latest rally, the metric successfully broke above the mark.
This means that during the bear market lows, investors sold at a loss, but thanks to the latest price surge, they made enough profit to be able to move coins at a profit.
This makes sense, but the indicator contains even more interesting information, which can be seen by its interaction with the line, at which its value becomes equal to 1. It can be seen from the chart that during the recent bearish period, the indicator constantly found deviations whenever it reached this marks.
The reason for this is that investors view this break-even level as a return on the money they previously lost due to bear market price drops. Because of this, there is a lot of selling going on here, causing price (and the metric itself) to run into resistance.
However, during bullish periods, this trend is reversed and the line becomes a support level for Bitcoin instead. This psychological shift occurs because, during a bull run, investors instead begin to view their break-even point as a buying opportunity, and so there is a lot of buying going on here, which drives the price up.
With the latest rally, this shift seems to have already begun to take place as the aSOPR 7-day EMA found support at this line during the last two retests as seen on the chart.
“Overall, this signals a reduction in selling pressure and a potential return of the ‘buy on dip’ mentality,” Glassnode notes. “A convincing retest of SOPR and a bounce off 1.0, especially on long-term moving averages (like 14D or 30D), is often a signal of a change in market mode.”
Bitcoin Price
At the time of writing, Bitcoin is trading around $24,500, up 13% over the past seven days.
BTC consolidates sideways | Source: BTCUSD on TradingView
Credit : www.newsbtc.com
