A quant expert has explained that Bitcoin is likely to see a strong rally in the coming months based on the golden cross that has occurred in this indicator.
Bitcoin SOPR Just Saw a Bullish Crossover
As one analyst in the CryptoQuant Quicktake post pointed out, Bitcoin’s Spent Output Profit Ratio (SOPR) recently showed a golden cross. “SOPR” here refers to an indicator that tells us whether BTC investors are selling their coins at a profit or a loss.
This index operates by examining the transaction history of each coin sold/transferred to see what price was last transferred. If this price is lower than the current spot price of any token, then selling that token will contribute to generating profit.
Similarly, transactions related to the opposite coin imply that loss realization is occurring. SOPR aggregates these profits and losses for the entire supply sold and determines their ratio.
When the value of this index is greater than 1, it means that the average holder can be considered to be selling their coins at a net profit. On the other hand, being below this level implies that the entire market is experiencing more losses than profits.
The following chart shows the trend of the 30-day and 365-day moving averages (MA) of Bitcoin SOPR over the past decade:
As can be seen in the chart above, the 30-day MA of Bitcoin SOPR fell below the 365-day MA at the beginning of the year, but recently, it has reversed direction and surpassed this level. This increase naturally corresponds to the return of notable profit-taking activity in the space after the latest price surge of the cryptocurrency.
In the chart, the quant has highlighted previous instances of this crossover. It seems that each of these cases led to price action increases for the asset.
"After the golden cross appears, the market usually starts to rise sharply at the latest within 2 months," the analyst noted. Therefore, it is possible that Bitcoin will soon prepare for another price surge.
The latest bullish crossover in Bitcoin's SOPR is the second time this pattern has appeared in this cycle, so it is likely that the current price surge will take this asset to the final peak of the cycle.
However, we still have to wait and see if the intersection between the monthly and yearly averages of the indicator proves to be a bullish trend for BTC.