Key Points
- Bitcoin’s Adjusted Spent Output Profit Ratio (aSOPR) nearing 1.08 indicates a potential risk of a price decline.
- Despite trending within a horizontal channel, Bitcoin’s market shows a significant bearish influence.
The price of Bitcoin (BTC) may be on the verge of a correction as a key on-chain metric approaches historically risky levels, according to a report by CryptoQuant analyst Woo Minkyu.
Minkyu evaluated Bitcoin’s Adjusted Spent Output Profit Ratio (aSOPR) using a 200-day moving average and discovered that its movement towards 1.08 could trigger a correction for the leading cryptocurrency.
Understanding aSOPR
The aSOPR of BTC gauges the profit or loss realized when the coin is spent by its holders. If the aSOPR value is above 1, it signifies that coins are being sold at an overall profit. On the contrary, a value below 1 indicates that investors are selling at a loss.
At the time of writing, Bitcoin’s aSOPR was 1.03, implying that BTC holders are currently profiting from selling their coins. Minkyu suggests that a rise in Bitcoin’s aSOPR value towards 1.08 could signal a potential risk of a price decline.
Bitcoin’s Current Trend
Currently, Bitcoin is trading at $64,584 and has been trending within a horizontal channel since the 20th of May, fluctuating between resistance at $71,926 and support at $64,529. A horizontal channel is formed when an asset’s price consolidates within a range for a certain period of time.
Bitcoin’s declining Average True Range confirms this consolidation phase. This indicator measures market volatility by calculating the average range between high and low prices over a certain number of periods. A decrease suggests lower market volatility and indicates that the asset’s price is trending within a range.
However, despite Bitcoin’s current range-bound trend, the market’s bearish influence is still significant. This is revealed by the coin’s Directional Movement Index (DMI). Currently, the coin’s negative directional index (red) is above its positive index (green), indicating a stronger bearish trend than bullish, suggesting a higher likelihood of a downtrend compared to an uptrend.
