Bitcoin Hasn’t Reached Bull Cycle Top Yet, Quant Explains Why

According to the trend in an on-chain indicator, an analyst has explained how Bitcoin may still need to reach the top of the current bull cycle.

As explained by an analyst in a CryptoQuant Quicktake post, the Bitcoin Adjusted Spent Output Profit Ratio (aSOPR) is yet to go as high as during the tops of the previous cycles.

The “SOPR” refers to a popular on-chain indicator that basically tells us whether cryptocurrency investors are selling their tokens at a profit or loss right now.

This metric works by going through the blockchain history of each coin sold to see what price it was transacted at before. If this previous price for any coin was less than the price it’s being sold now, then its sale is leading to profit realization.

Similarly, coins of the opposite type would imply loss-taking. The SOPR calculates the ratio between such profits and losses being realized across the network to provide a net situation.

When the indicator’s value is greater than 1, the investors are selling their coins at a net profit. On the other hand, values under this mark suggest the dominance of loss realization in the market.

In the context of the current discussion, the SOPR itself isn’t of interest here, but rather a modified form called the “aSOPR.” This indicator adjusts the SOPR data to exclude transactions of coins made within an hour of their previous transfers (hence the “adjusted” in the front of the name).

Now, here is a chart that shows the trend in the 90-day exponential moving average (EMA) Bitcoin aSOPR over the past few years:

As displayed in the above graph, the 90-day EMA Bitcoin aSOPR had observed a rise alongside the rally earlier in the year. This implies that investors had ramped up their profit-taking as the coin’s price surged to a new all-time high (ATH).

With the bearish momentum that BTC has been facing since then, though, the indicator has also seen a cooldown. At the peak of the profit realization spree, the indicator had crossed the 1.05 mark, but now it has come down to just 1.01.

As the quant has highlighted in the chart, the bull run tops in 2017 and 2021 occurred as the indicator approached a value of 1.1. The recent high in the indicator has been significantly below this mark.

The peak level seen in the recent rally was similar to the one witnessed during the peak of the April 2019 rally. This recovery surge from the previous cycle had only been a prelude to the real bull run that would come later, so BTC may also see something similar play out this time.

Bitcoin has enjoyed a rally of around 5% in the past 24 hours, taking its price back above the $63,000 level.