When Will Bitcoin Bottom Out? This Could Be The Signal To Watch

On-chain analytics firm Glassnode has revealed how the Bitcoin price often forms local bottoms when this holder group shows capitulation.

In a new post on X, Glassnode has talked about how short-term price action is often dictated by the top buyers’ reaction to post-ATH drawdowns. As the price slides down, these holders quickly get into losses and can become prone to making panic moves.

Bitcoin is currently in such a phase, with a notable amount of supply having a cost basis in the zone between the latest spot price and $120,000, as the below chart shows.

The indicator in the graph is the Cost Basis Distribution, which tells us, as its name suggests, how much of the BTC supply last changed hands at the various price levels. From the metric’s data, it’s apparent that investors have slowly been building up a dense supply cluster below $120,000 as the asset has been trading inside the range since early July.

The recent Bitcoin price plunge naturally put these investors underwater, so the question is: how have these holders been reacting? An indicator that can help shed light on the matter is the Spent Output Profit Ratio (SOPR). This metric compares the amount of profit and loss that the investors as a whole are realizing on the network.

When the value of the SOPR is greater than 1, it means the average holder is selling their coins at a profit. On the other hand, it being below the threshold suggests loss-taking is dominant on the network.

In the current discussion, the SOPR of the entire market isn’t of interest, but rather that of a specific part of it: the top buyers. These would be the investors who got into the cryptocurrency over the last three months.

Here is the chart shared by Glassnode that shows the trend in the Bitcoin SOPR for the investor cohorts falling in this age range:

As is visible in the above graph, the Bitcoin SOPR has dropped for all three of 1 day to 1 week, 1 week to 1 month, and 1 month to 3 months groups following the price decline.

The indicator is now floating between 0.96 to 1.01 across these cohorts, indicating these investors have started selling at a mild loss. “If pressure builds, local bottoms often form when this group capitulates, typically when SOPR drops below ~0.9,” notes Glassnode.

For now, though, it seems Bitcoin may not have to wait for this capitulation signal, as its price has seen a rebound in the past day.

At the time of writing, Bitcoin is trading around $116,000, down 2% over the past week.