As a researcher observing the cryptocurrency market, I noticed that from January 7th to January 9th, Bitcoin (BTC) dipped by approximately 11%. This marked a significant drop below the $92,000 price point for the first time in nine days.
During this timeframe, a significant decrease caused the sale of approximately $257.5 million worth of highly-leveraged long investments. This event occurred alongside profit-making activities, robust economic statistics, and apprehension about the upcoming presidency of Donald Trump in the United States.
Even though Bitcoin (BTC) is currently experiencing a brief downturn, three key indicators suggest that the fall to $92,000 might have represented the local lowest point. This dip could offer an attractive investment opportunity for investors.
SOPR drop hints at Bitcoin price bottom
According to blockchain information, the Spent Output Profit Ratio (SOPR) of Bitcoin fell to 0.98 on January 10th, indicating that short-term investors who bought Bitcoin within the last 155 days might be selling it at a financial loss.
According to market intelligence firm CryptoQuant, the recent drop in Bitcoin’s value can be attributed to “short-term investors recognizing their losses.” (Jan. 9 post on X)
“In the past 24 hours, 36.4k Bitcoin have been transferred from Short-Term Holders to Exchanges, with the Spent Output Profit Ratio (SOPR) dropping below 1. ”
The metric SOPR, or Spent Output Profit Ratio, evaluates whether a spent Bitcoin output resulted in a gain or loss, by considering the price at which it was last transferred versus its worth upon being spent again.
The brief-term Spent Output Profit Ratio (SOPR) concentrates on cryptocurrencies moved within half a year. It can be useful in gauging the market’s overall mood. If the figure is less than 1, it may imply capitulation or a market bottom, possibly signaling an opportune moment for purchase.
In many cases, this situation has led to price increases, suggesting a possible chance for purchase. It’s worth noting that when the Spend Output Profit Ratio (SOPR) dipped to 0.90 after Bitcoin plummeted to $49,577 on August 5, 2024, it was followed by a 31% price surge to $65,103 just three weeks later.
Lately, Bitcoin (BTC) experienced a significant surge of approximately 62% to record highs above $108,000 from November 5, 2024, to December 17, 2024. This rally followed a decline in the SOPR ratio that fell below 1 on November 4, 2024.
Consequently, certain investors viewed the dip down to $92,000 as a chance to purchase, considering the market behavior more as a clearing out of fragile holders instead of the start of a fresh bear trend.
Sean Buckley, a Bitcoin investor, commented, ‘I’m purchasing some Bitcoin at $92,800. The price movement is aggravating, but I believe these levels are crucial support areas.’
“Bitcoin’s $92k range would be the area to bounce hard if we’re going to bounce.”
BTC entity-adjusted dormancy flow flashes green
A measure that can help ascertain if the Bitcoin market has hit its lowest point is called Entity-adjusted Dormancy Flow. This metric calculates the ratio of Bitcoin’s current market cap and the annualized dormancy value (expressed in USD).
As a seasoned crypto investor, I’ve observed that when this particular indicator dips below 250,000 (noticeable by the red circles), it traditionally signifies a promising buying opportunity, often preceding substantial price rebounds or marking the conclusion of price downtrends.
The indicator dropped from 260,278 on Dec. 16 to reach a low of 210,000 on Jan. 9.
Historically, when Bitcoin’s value surpasses 250,000 after experiencing a prior drop, it often signals the start of substantial bullish trends. For example, in July 2021, Bitcoin reached its bottom and initiated a new bullish trend, moving into the positive range for this metric. This trend continued until November 10, where Bitcoin achieved an all-time high of $69,000.
Based on the positive indication from the indicator, there’s a possibility that the price might rebound from its current low of $92,000 and make a significant push towards reaching new record highs.
Bitcoin long-term supply distribution has peaked
Moreover, the proportion of Bitcoins owned by long-term holders (LTHs) hit a record low since December 6, 2024. This suggests that LTHs have been distributing their Bitcoins over the past month, possibly due to cashing out after Bitcoin surpassed $108,000 and peaked at all-time highs.
Presently, the pace at which Long-Term Holders (LTHs) are distributing has noticeably decreased. The 30-day fluctuation in LTH supply seems to indicate that the distribution rate may have peaked, mirroring highs from past cycles, as suggested by Glassnode’s analysis.
Lowering trends in Long-Term Holds (LTH) distribution could indicate that the market is shifting from a distribution stage towards an accumulation period, a pattern that typically coincides with market low points in history.
Explaining this phenomenon in a Jan. 10 post, Glassnode said:
“In past cycles, price continued to climb even after LTH distribution peaked. This infers that a peak in distribution doesn’t always align with an immediate macro top.”
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2025-01-10 19:47