Although an on-chain indicator suggests bitcoin investors may soon face losses, Glassnode believes BTC is on the verge of a recovery.
A report from crypto data website Glassnode on 25 January said Bitcoin’s so-called aSOPR indicator suggests that a further fall in the price will send many investors into the red. However, this depends on when their holdings last moved on the chain.
Although the indicator suggests that few investors will see paper gains, Glassnode interprets the data as bullish. On this, the website explained:
„For the SOPR to fall lower, investors would have to be willing to sell at a loss. This is unlikely given the current state of the market. We’ve been waiting for this reset to bring some stability to the market and pave the way for the next bull run.“
Glassnode describes this indicator as a representation of the profit ratio of coins based on the bitcoin price when they last moved on the chain. Since the aSOPR is an on-chain indicator, it does not take into account BTC circulations on central exchanges.
The aSOPR typically fluctuates around 1. However, the extremely bullish momentum of recent months has seen Bitcoin’s aSOPR rise above 1.15 in late December and the first half of January.
However, in a bullish market, values of aSOPR below 1 are rejected as traders are unwilling to sell at a loss.
Glassnode said aSOPR indicates that the current correction is coming to an end. From its peak to the bottom of its recent run, Bitcoin fell 31 per cent as it retreated just below US$29,000 on 22 January. Bitcoin was at around US$31,750 at the time of going to press.
On 25 January, Glassnode also reported that 2.3 million BTC, or 12.6 per cent of Bitcoin’s supply in circulation, had moved on the chain. BTC was above 30,000 US dollars. This was considered bullish.
„This is significant considering that BTC only crossed the US$30,000 mark this year. This indicates that investors are bringing in capital and thus believe in further price increases.“