Has Bitcoin Reached Its Price Bottom? Could There Be More Decline?

• A CryptoQuant analyst revealed that Bitcoin’s Spent Output Profit Ratio (SOPR) has fallen below the critical threshold of 0.97, indicating that the cryptocurrency’s price has reached a local bottom.
• According to data tracked by Santiment, Bitcoin’s Average Spent Age witnessed a significant increase on August 29th. Following this, a decline in Bitcoin’s value occurred, showing that the price peaked at $27,727.
• The movement of dormant coins coincided with the Securities and Exchange Commission’s (SEC) decision to extend the dates for reviewing all pending Bitcoin Spot ETF applications.

One of the most pressing questions during the period of uncertainty in the Bitcoin market is whether Bitcoin will establish a new bottom. Has Bitcoin completed its descent?

Bitcoin’s Price Bottom May Be Completed

In a recent report, CryptoQuant analyst Tarekonchain highlighted that Bitcoin’s Spent Output Profit Ratio (SOPR) has fallen below the critical threshold of 0.97, indicating that the cryptocurrency’s price has reached a local bottom and that a potential price recovery could be on the horizon.

SOPR is a significant metric used to measure the profitability of coins moved on the blockchain. A SOPR value of one suggests that, on average, coins are being moved at a profit. Conversely, a SOPR value below one suggests that, on average, coins are being moved at a loss.

Tarekonchain drew inspiration from historical precedents of the metric and stated:

“Market bottoms seem to happen when the SOPR value falls below the critical threshold of 0.97, indicating that investors typically sell their Bitcoin assets at a loss during bear markets or major corrections, pulling the SOPR below this threshold.”

The analyst noted that Bitcoin’s SOPR previously surpassed this critical threshold in January 2019 and April 2020, both preceding significant increases in Bitcoin’s value:

“Predictably, the SOPR metric briefly touched the 0.97 threshold in November 2022, indicating that investor sentiment was approaching a critical level.”

This Metric Suggests Something Different

According to Tarekonchain, while Bitcoin’s SOPR points towards a potential market bottom, the Age Consumed metric suggests something different. The Age Consumed metric tracks the number of tokens that changed addresses on a specific date, multiplied by the number of days since their last move.

An increase in this metric often indicates that previously dormant tokens have started changing addresses significantly. This implies a sudden and significant change in behavior among long-term holders. Conversely, when the Age Consumed metric decreases, it indicates that long-held coins remain in wallet addresses without being traded.

This metric is an excellent tool for tracking local highs and lows of assets because long-term holders are not typically inclined to make rapid moves. Therefore, it often leads to significant shifts in market conditions.

As per data tracked by Santiment, Bitcoin’s Average Spent Age witnessed a significant increase on August 29th, followed by a decrease in Bitcoin’s value, indicating that the price peaked at $27,727.

This movement of dormant coins coincided with the Securities and Exchange Commission’s (SEC) decision to extend the dates for reviewing all pending Bitcoin Spot ETF applications. This move further dampened market sentiment and influenced Bitcoin’s price downward.