Last Updated: 6 June 2022
With the bitcoin on-chain update we select what is happening on the BTC blockchain. What signals are we seeing on-chain?
1. Spent Output Profit Ratio (SOPR)
This is also supported by Glassnode’s Spent Output Profit Ratio (SOPR). This indicator records the difference between the purchase and sale amount.
A value above 1 means virtual profit, a value below 1 means virtual loss. Currently the indicator has a score of 0.96, so the median of the market is at a loss. But it is not yet a realised loss, which happens when one spends or sells the coins to someone else.
According to this CryptoQuant analyst, this indicator is still in a ‘bearish bias’. He points out that this indicator has not moved above the resistance zone, which supports the negative bias. He sees no signs yet that the current bear market is over.
2. Dormancy Flow
The Dormancy Flow is the ratio of the total value of the bitcoin market to the total value of ‘dormant’ coins over 12 months.
This is because it is possible to measure the age and value of every bitcoin piece in a transaction (or: UTXO). In other words, how long it has been ‘sleeping’ on the network.
This ratio is at a very low level, a signal that bitcoin is overbought. If it hits the green zone, it is a bottom.
The peaks in the chart below are therefore a bundle of (stick) old coins which have been spent. Recently, there has not been a commensurate issue of ancient coins, which is a positive sign.
Analyst Plan C takes the 14-day average of this metric. He concludes that bitcoin is bottoming out considerably and is at the same level as in the autumn of 2018. Back then, the price finally reached a low of $3,200 while it broke the $20,000 mark just a year earlier.
Things can change, it does not mean that history is repeating itself again and that there is already an absolute bottom. The price depends on many (sentiment) factors and external metrics such as general confidence and liquidity in the market. And future market events such as a spot ETF in America or the launch of bitcoin bonds from El Salvador could also provide a boost.
3. HODL Wave
The 1Y+ HODL Wave metric was designed by Unchained Capital, a provider of bitcoin custody services. It is the percentage of all mined bitcoin which have not been sold (issued on the blockchain) for at least 12 months. This metric is rising, a good sign that bitcoin holders are maturing coins to 1 year or older.