Bitcoin STH SOPR Rises Above 1 — A Trend Reversal Signal?

[Ben Graham]

Bitcoin continues to hover within the $90,000 price range, producing no significant price movement in the last 24 hours. Meanwhile, a subtle on-chain development is indicating a potential change in market trend.

STH SOPR Above 1 — Bullish Rebound Or Fakeout? 

The Short-Term Holder Spent Output Profit Ratio (STH-SOPR) is a key on-chain metric that judges investors’ sentiment. In definition, the STH-SOPR measures whether Bitcoin holders are presently selling their assets at a loss or at a profit. According to pseudonymous analyst CryptoMe, this important on-chain metric has recently flashed an eye-catching signal that could imply a trend reversal following months of deep market corrections.

Notably,  Bitcoin slipped into a prolonged downtrend in early October, after establishing its current all-time high at $126,100. On October 10, which represents the initial phase of this price correction, CryptoMe states the STH-SOPR fell below 1.0 in line with its natural behavior. As seen in the image above, the Bitcoin STH-SOPR stays below 1.0 during bear seasons to indicate that BTC holders are exiting at a loss. During this period, it is also observed that 1.0 midline acts as an effective resistance, restricting upward STH-SOPR movement to signal that the market structure remains weak. Alternatively, in bullish markets, the STH-SOPR moves above 1.0, which becomes a strong price floor provided a buy-side dominance remains. According to CryptoMe, this latter positive scenario has occurred in the past week, marking the first instance after October 10. In line with standard interpretation, CryptoMe explains that this recent development represents a new hope for a possible trend reversal if the STH-SOPR sustains its move above the 1.0 threshold. Notably, an opposite case would suggest a fake-out and possibly reinforce existing bearish market sentiments.

Bitcoin Market Overview

At the time of writing, Bitcoin trades at $90,590, after a negligible 0.13% gain in the past 24 hours. However, its daily trading volume is down by 66.41% and valued at $13.38 billion. This suggests that market participation is fading out amid a sustained consolidation.

In terms of a potential breakout, emerging market catalysts suggest an equal potential for the price to swing in either direction. For example, the odds of the Federal Open Market Committee implementing a rate cut have dropped drastically from 95% to 5%. Following recent predictions, the policy committee is likely to hold the rates steady, which may draw out a possible negative reaction from Bitcoin.

On the other hand, regulatory developments in the US are shaping up positively. Most notably, the Clarity Act has been slated for a markup session, indicating progress toward regulatory clarity that could encourage further institutional and retail investment.