Key Indicator of Bitcoin Market Profitability Turns Bearish – Here’s What That Means for the BTC Price
A key indicator of profitability in the Bitcoin market just turned negative, a bearish sign according to some analysts. In wake of Bitcoin’s latest price dip back to the $22,000 area, the 30-day Simple Moving Average of the average Spent Output Profit Ratio (aSOPR) recently fell back below 1, as seen in the below chart presented by crypto data analytics firm Glassnode.
This signifies that the Bitcoin market is now, on average, realizing losses in on-chain spends, explains Glassnode. The crypto data firm says that when the aSOPR is above 1 this generally “aligns with both a healthier inflow of demand (to absorb profit taking), and a more constructive opinion of the asset”.
The aSOPR only considers the profit/loss on a per spent output basis and not coin volume, meaning that it gives equal weight to shrimps and whales, which Glassnode says means it provides a “view of the widest cross-section of the market”. Glassnode uses a 30-day Simple Moving Average when looking at this indicator in order to provide a slower but higher conviction market signal.
If downside in the Bitcoin price extends in the coming days and weeks, as many now fear is a likelihood in wake of key technical support being broken and Fed Chair Jerome Powell’s latest hawkish surprise, then another key indicator of profitability in the Bitcoin market will likely also turn negative.
The 30-Day Simple Moving Average of Glassnode’s Realized Profit and Loss (P/L) Ratio has been falling in recent days and if the current rate continues, could drop under 1.0 later this week. When the Realized P/L Ratio is above 1.0, this “signifies that the market is now realizing a greater proportion of USD-denominated profits, than losses,” Glassnode explains.
“Unlike the aSOPR model
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