In a series of recent tweets, CryptoQuant, the leading provider of on-chain data and analytics for cryptocurrencies, has shed light on the potential market phases for Bitcoin. The analysis focuses on two crucial metrics: Long Term Output Profit Ratio (LTH SOPR) and Short Term Output Profit Ratio (STH SOPR).
According to the experts at CryptoQuant, the LTH SOPR is a vital indicator that measures the ratio of spent outputs lived for more than 155 days and currently in profit. By excluding the movements of coins that lived for less than 155 days, the LTH SOPR successfully tracks the behavior of long-term investors.
Bitcoin’s Journey Through Bear & Bull
In a bullish market, level 1 in the LTH SOPR acts as a strong support level, allowing Bitcoin to initiate an early bull market phase. Notably, historical data from 2016 and 2020 confirms this trend, with Bitcoin crossing and holding level 1 during those years.
However, the analysis acknowledges an exception during 2019-2020, impacted by the unforeseen black swan event, the Covid pandemic. Despite this anomaly, all current indications suggest that if no black swan-type occurrence, such as a new virus or armed conflict, disrupts the market, Bitcoin is likely in the early stages of a bull market.
On the other hand, the STH SOPR, which measures the ratio of spent outputs lived for more than 1 hour but less than 155 days and currently in profit, offers valuable insights into the behavior of short-term investors. In a bullish market, level 1 in the STH SOPR also acts as a support level, further solidifying the presence of a bull market phase when Bitcoin crosses this threshold.
The correlation between the behaviors of long-term and short-term investors is evident in historical data from 2016 and 2020. Following the crossing of level 1 in the STH SOPR, Bitcoin initiated bull market phases as investors refrained from selling their BTC at a loss, reinforcing positive market sentiment.
Well, the combination of on-chain data and analytics provided by CryptoQuant paints a promising picture of Bitcoin’s future. With the LTH SOPR and STH SOPR metrics pointing toward the early stages of a bull market, the crypto market appears to be on a positive trajectory.
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