Bitcoin rally hope is still alive, if this metric is to go by

If the historical pattern in this on-chain indicator is anything to go by, hope for a continuation of the bitcoin rally may still be alive.

Bitcoin SOPR ratio has been on the rise in recent weeks

As one analyst in a CryptoQuant post pointed out, the SOPR ratio has been hovering above 1 lately. The “Expense Output Profit Ratio” (SOPR) indicates whether investors in the bitcoin market are currently selling their coins at a profit or loss.

When the value of this metric is above 1, it means that the average holder in the sector is currently moving their coins at a loss. On the other hand, values ​​below this range mean that the market is currently making net profits.

The BTC sector is generally divided into two main holder groups: “short term holders” (STH) and “long term holders” (LTH). The former cohort includes all investors who received their coins within the last 155 days, while the latter cohort includes those who bought before this cutoff.

In the context of the present discussion, the relevant indicator is not the SOPR itself but the “SOPR ratio”. This indicator specifically measures the ratio between the SOPR for LTH and STH.

Now, here is a chart showing the trend in the 30-day Simple Moving Average (SMA) Bitcoin SOPR ratio throughout the asset’s history:

Looks like the value of the metric has been going up in recent days | Source: CryptoQuant

As you can see in the graph above, the volume marked the pattern that the 30-day SMA Bitcoin SOPR ratio seems to have followed during the cryptocurrency’s previous cycles.

Whenever the SOPR ratio is below 1, LTH has lower profits than STH. Historically, this has usually been seen inside bear markets.

Bear market bottom formation in the asset price always occurs when the indicator falls well below this mark and reaches a value of around 0.5.

Bullish period followed with a bounce in the metric above the 1st level. Such breakout implies a change in market dynamics, as LTH is making higher profits than STH during such periods.

During the rally over the past few months, the 30-day SMA Bitcoin SOPR ratio managed to move above the 1 mark again, indicating that a shift towards a bull market may be underway.

Despite the recent struggle that the coin has seen, the metric remains above this level. Analysts believe that this is a sign that the bullish dominance is intact in the market.

From the chart, it is also visible that the current values ​​of the SOPR ratio are nowhere near as high as during the previous rallies, including the April 2019 rally, which may indicate that the rally has some potential to go past the top .

btc price

At the time of writing, bitcoin is trading around $27,900, up 4% over the past week.

BTC has gone up during the past day | Source: BTCUSD on TradingView

Featured images from iStock.com, Charts from TradingView.com, CryptoQuant.com