As cryptocurrency enthusiasts closely monitor market movements and indicators, the Long-Term Holder Spent Output Profit Ratio (LTH SOPR) has become a subject of intense scrutiny. Recent reports from CryptoQuant suggest that the LTH SOPR is approaching the key value area of “1,” which represents a critical dividing line for long-term holders deciding whether to spend their coins at a profit or at a loss, on average. However, historical analysis reveals intriguing patterns of behavior in previous cycles.
Drawing parallels to previous market cycles, it is worth noting that the first re-test of the value area “1” was never precisely reached. Instead, it appears that this critical level was “front-ran” in previous instances, as observed in both the 2014-2015 bear market and the 2018-2019 bear market driven by the PlusToken Ponzi scheme.
In the 2014-2015 bear market, the “1” value was never touched. Whales in the market anticipated this level and began accumulating coins at a value of around 1.05. The first low point occurred at that level on December 5th, 2015, followed by a second attempt on February 10th, 2016, which fell just short of reaching the “1” line.
Similarly, during the 2018-2019 bear market and the subsequent PlusToken Ponzi scheme-induced “echo bubble” burst, the value of “1” was front-ran at approximately 1.07. This led to multiple tests and an extended period of accumulation by long-term holders, lasting for about a month from mid-December 2019 to mid-January 2020. Notably, two months later, the infamous March 2020 market crash occurred, providing another opportunity to accumulate coins at unexpectedly low levels.
At present, we find ourselves in a situation that echoes these historical patterns. As of the latest data, the LTH SOPR shows the first higher low (HL) at a value of approximately 1.08, with indications of a second HL in progress around 1.11.
It is important to mention that there is a noticeable divergence between the price action (PA) and the LTH SOPR indicator, which can be attributed to the 20-day moving average (20DMA) smoothing out the usual SOPR “chop.” However, if we examine the indicator’s value itself, we find that the “chop” tends to rebound aggressively above the “1” line. Could this be a result of algorithms opportunistically buying whenever the LTH SOPR falls below 1?
The current situation presents two possible scenarios: either the “front-running” behavior is set to continue, indicating a sustainable trend, or there is one more chance for the LTH SOPR to dip below the critical value area. The author of this article personally leans slightly towards a more bullish perspective.
As always, it is crucial to approach market analysis with caution, as cryptocurrencies are known for their volatility and unpredictable nature. While historical patterns provide valuable insights, they are not definitive indicators of future outcomes. Traders and investors are advised to conduct thorough research, consider multiple factors, and exercise sound judgment when making decisions in the crypto market.
In conclusion, the LTH SOPR’s approach to the key value area of “1” has generated significant interest among crypto enthusiasts. Drawing on historical observations, it appears that this level has been “front-ran” in previous cycles. The current situation raises questions about the potential continuation of this trend or the possibility of another dip. Market participants are urged to exercise caution and remain vigilant in their analysis and decision-making processes.
Read more:
- Uncovering The Impact Of Exchange Reserve Trends On Cryptocurrency Markets
- Bitcoin Supply Shift: US Holdings Decrease By 10% While Asia Takes The Lead
- SOPR Metric Indicates Strong Interest In Bitcoin: Another Wave Of Demand Expected