On-chain data shows the Bitcoin Spent Output Profit Ratio (SOPR) is nearing a retest of a very important line. Will the bulls be able to come out on top?

As pointed out by an analyst in a CryptoQuant post, the SOPR is approaching a value of 1. The “SOPR” is an indicator that tells us whether the average investor in the Bitcoin market is selling their coins at a profit or at a loss right now.

When the value of this metric is greater than 1, it means the overall market is moving coins at some profit right now. On the other hand, values below the threshold imply the holders as a whole are realizing some loss at the moment.

Naturally, when the SOPR has values exactly equal to 1, it means the profit being realized in the market is exactly equal to the loss right now, suggesting that the average investor is just breaking even on their investment.

Now, here is a chart that shows the trend in the 7-day simple moving average (SMA) Bitcoin SOPR over the last few months:

As shown in the above graph, the 7-day SMA Bitcoin SOPR had recently broken above the 1 level as the BTC price rallied. This means that the price surge got enough investors into the green that they were able to sell their coins at a net profit.

Before this breakout, the indicator had been stuck below the 1 mark for the better part of the past year. From the chart, it’s apparent that when the metric was below the level, it attempted many retests, but they always failed and the metric was rejected down (along with the price).

This trend wasn’t unusual and had already been observed in past bear markets. The reason this happens is that the SOPR equal to 1 value acts as a psychological level where investors think that they have gotten their money “back” (that they previously lost to bear market losses) and so a large amount of selling takes place here, thus providing resistance to the price.

In bull markets, however, the average holder starts viewing their break-even mark as a profitable entry into the market (since they have the conviction that the price will go up in the near future), so they start buying here instead. This leads to the line flipping into a support level for the price.

From the chart, it’s visible that just a few days back, the 7-day SMA Bitcoin SOPR retested this level from above and the line successfully acted as support, which could be an early sign that a transition towards a bull-dominated market is in progress right now.

With the latest decline in the price today, the SOPR is again declining and is approaching another retest of this key line. It now remains to be seen whether bulls will win out and the price will rebound successfully, or if bears will again get into the driving seat and the SOPR will dip below 1 once more.

At the time of writing, Bitcoin is trading around $21,800, down 7% in the last week.

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