Key Takeaways

  • Demand for Bitcoin is rising as whales take advantage of every dip to buy Bitcoin at a discount.
  • Regardless, the SOPR indicator forecasts that BTC looks primed to retrace.
  • While the on-chain metric forecasts an 80% correction, the $30,000 level could keep falling prices at bay.

Share this article

After doubling in less than a month, Bitcoin bulls have dominated the narrative. Though further gains are likely, a particular on-chain metric suggests that the top is near.

1,000% Rally Without Any Major Corrections

Bitcoin has enjoyed an impressive rally ever since the market crash in mid-March 2020.

Following a 54% correction, known as Black Thursday, the pioneer cryptocurrency entered a new uptrend fueled by the havoc that COVID caused on the global economy. Indeed, institutional investors have flocked to the market en mass looking for a hedge against inflation.

The significant increase in Bitcoin demand pushed its market value by nearly 1,000% since Mar. 13, 2020. BTC’s price went from trading at a low of $3,620 to make a new all-time high of $42,125.

The upswing was not entirely smooth since the flagship cryptocurrency suffered seven minor corrections that helped sidelined investors re-enter the market. As buying pressure increased in every pullback, BTC rose to make higher highs.

Most recently, Bitcoin experienced one of the largest one-day corrections since March 2020’s Black Thursday, shortly after surging to a record high of $42,125.

Its price plummeted by more than 26%, to hit a low of $30,450.

BTC/USD on TradingView

Some whales appear to have taken advantage of the downswing to add more tokens at a discount to their portfolios, as they have done in the past. The number of addresses holding 1,000 to 10,000 BTC surged by nearly 2% as prices tumbled.

Roughly 43 new mid-sized whales joined the network within a short period, helping Bitcoin regain the $35,000 level as support.

Bitcoin Holders Distribution by Santiment

Although investors are preparing for another leg up that could see BTC rise above $50,000, one on-chain metric suggests that a market top is near.

Bitcoin Is Primed to Retrace

Based on the Spent Output Profit Ratio (SOPR) indicator, Bitcoin sits in overbought territory.

This fundamental metric represents the profit ratio of BTC tokens moved on-chain, measured through the variation between the purchase price and sale price.

“A SOPR value of greater than 1 implies that people are, on average, selling at a profit (because the price sold is greater than the price paid). Likewise, when SOPR is below 1, this implies that people would be selling at a loss,” according to Glassnode.

Each time this on-chain index rose to near a value equal to or higher than 1.20 over the past eight years, it served as a sell signal leading to a steep correction.

For instance, the SOPR rose to 1.19 in early April 2013 when Bitcoin was peaking at a high of $268.70. Following this milestone, BTC suffered an 81% retracement to hit a low of $51.30 over a week later.

Similar price action occurred after the SOPR rose to a high of 1.24 in late November 2013. Bitcoin saw its market value crash by 86%, dropping from a high of $1,177 to a low of $164.

The SOPR was also able to estimate that Bitcoin was bound for a pullback in mid-December 2017 when its price surged to an all-time high of nearly $20,000. During this time, the on-chain metric peaked at a value of 1.20, followed by the bear market of 2018.

Bitcoin Spent Output Profit Ratio by Glassnode

Now that Bitcoin has risen to a new all-time high of $42,125, the SOPR is hovering at a value of 1.24.

If this indicator proves to be as accurate as previous instances, BTC will likely enter a considerable corrective period before its uptrend resumes.

Key Price Levels to Watch

An 80% correction from the recent peak seems to be out of the question when considering the interest that high net worth individuals have shown for Bitcoin.

Regardless, such a steep decline is not uncommon in this token’s history, as explained previously.

A sell-off of the magnitudes seen before will push BTC’s price towards $8,400. But to get there, the bellwether cryptocurrency will have to break through a significant number of demand barriers that sit underneath it.

Several support walls can be defined by measuring the Fibonacci retracement indicator from mid-December 2017’s peak to mid-December 2019’s low. First, Bitcoin will have to smash the $30,000 mark to target $24,000. Only a 3-day candlestick close below this level will signal a continuation of the downtrend towards $20,000.

If the $20,000 hurdle fails to hold the potential sell-off, then $14,000, $11,500, and $9,500 will come into play.

BTC/USD on TradingView

It is worth noting that despite the accuracy that the SOPR has had in anticipating previous market tops, the ongoing bull run is fueled by several fundamental factors that may invalidate any bearish signal.

Thus, if buying pressure continues to mount, investors must watch out for a break of the recent high of $42,125.

A 3-day candlestick close above this resistance wall will jeopardize the bearish outlook and lead to further gains. On its way up, Bitcoin could target $47,000, or even $53,400, before its next meaningful correction.

Disclosure: At the time of writing, this author owned Bitcoin and Ethereum.

Share this article

28 COMMENTS

  1. Hello, its nice article on the topic of media print, we all be familiar with media is a great source of facts.

  2. I’m truly enjoying the design and layout of your blog. It’s a very
    easy on the eyes which makes it much more enjoyable for
    me to come here and visit more often. Did you hire out a developer to
    create your theme? Outstanding work!

  3. Because the admin of this site is working, no doubt very quickly it will be renowned, due to its quality contents.

  4. Wonderful blog! Do you have any helpful hints for aspiring writers?

    I’m planning to start my own website soon but
    I’m a little lost on everything. Would you advise starting with a free platform like WordPress or go for a paid option? There
    are so many options out there that I’m completely confused ..
    Any suggestions? Kudos!

  5. Hello! I’ve been following your web site for some time now
    and finally got the courage to go ahead and give you a shout out from Dallas Tx!

    Just wanted to mention keep up the fantastic work!

  6. Hi, Neat post. There is a problem together with your website in internet
    explorer, may test this? IE still is the marketplace chief and a huge component of people will miss your wonderful writing because of this
    problem.

  7. What’s Going down i’m new to this, I stumbled upon this I’ve found It positively helpful and it has aided me
    out loads. I’m hoping to contribute & assist different customers like its aided me.
    Good job.

  8. Useful information. Lucky me I found your web site
    accidentally, and I’m surprised why this coincidence did not
    took place earlier! I bookmarked it.

  9. I like the valuable information you provide in your articles.
    I’ll bookmark your blog and check again here regularly.
    I’m quite sure I’ll learn many new stuff right here! Best of luck for the
    next! quest bars http://j.mp/3C2tkMR quest bars

  10. Howdy! I understand this is sort of off-topic however I needed to ask.
    Does running a well-established blog such as yours require a large amount of work?
    I am brand new to writing a blog but I do write in my journal on a daily basis.
    I’d like to start a blog so I can share my personal experience and
    thoughts online. Please let me know if you have any kind of ideas
    or tips for brand new aspiring blog owners. Appreciate it!
    quest bars https://www.iherb.com/search?kw=quest%20bars quest bars

  11. I don’t even know how I stopped up right here, but I
    assumed this put up was once good. I don’t understand who
    you are but certainly you are going to a well-known blogger if you aren’t already.
    Cheers! ps4 games https://bitly.com/3nkdKIi ps4 games

LEAVE A REPLY

Please enter your comment!
Please enter your name here