Is Bitcoin’s Upward Cycle Back? Key Insights Into The Latest Recovery

Bitcoin (BTC) has rebounded to trade above $99,000 following its significant dip earlier this week. While the latest US Consumer Price Index (CPI) news appears to have contributed to this quick recovery, it has also drawn attention from analysts, who are closely monitoring key metrics to understand the market’s next move.

A CryptoQuant contributor known as Crypto Dan recently provided insights into Bitcoin’s current market behavior. Highlighting the Short-Term Spent Output Profit Ratio (SOPR), Dan observed that the metric has shown a recurring pattern during correction phases.

This pattern, he noted, typically dampens market optimism before a subsequent rebound. Despite the recent correction, signs point to the potential resumption of an upward cycle in the near future.

The SOPR metric measures the profitability of spent outputs relative to their realized value, providing insights into market participants’ behavior during price corrections.

According to Crypto Dan, during corrections, the SOPR oscillates between red and green zones. The red zone signals increased profit-taking, often driven by whale activity, which can extend correction periods. Conversely, the green zone indicates reduced selling pressure, setting the stage for potential rebounds.

Dan reveals that the SOPR currently shows a smaller volume of profit-taking compared to previous correction periods, such as the seven-month correction earlier in the year.

This trend suggests that the recent correction, which has lasted over a month, may be shorter in duration. Dan speculates that Bitcoin could resume its upward trend within the first quarter of 2025.

However, he cautioned that short-term volatility remains a risk, with the possibility of further sharp drops before a sustained reversal. The analyst wrote:

However, in the short term, there may still be one or two sharp drops that push SOPR below the yellow dotted line, potentially crushing market participants’ hope for a rally before the market reverses upward. As such, aggressive short-term trades should be approached with caution.

Meanwhile, Bitcoin appears to now be making its way back above the $100,000 mark as the asset currently trades at a price of $99,494, at the time of writing marking a 2.7% increase in the past day.

This increase in Bitcoin’s price aside from being attributed to the underlying positive metrics on the BTC network can also be linked to the latest update on the US CPI.

According to the latest reports, the US CPI rose by 0.4% in December—this news has resulted in the US Dollar seeing a notable plunge while other financial assets saw the opposite trend recording an uptick.

Featured image created with DALL-E, Chart from TradingView