The decrease in the price of bitcoin (BTC) is probably based on several points in the data in the chain, namely the Spent Output Profit Ratio (SOPR), stable inflows, ordered orders to sell for $ 19,000 and an index of crypto and fear. However, the question remains when this correction would occur.
Recover profits at the lowest possible purchase pressure
The SOPR indicator essentially measures how profitable bitcoin holders are at the moment. When SOPR is high, BTC is at risk of returning a profit, as traders tend to sell when they have a profit.
Meanwhile, the influx of stable coins shows how many stable coins, such as USDT Tether, flow into the exchanges. When the inflow of stable currencies increases, it usually means that the demand for buyers increases. On the other hand, the pressure on sales tends to increase when BTC reserves outpace the inflow of stable coins.
In the last few days, the SOPR indicator has reached a level that previously led to the price of bitcoin adjusting, such as at the end of 201
On November 20, Rafael Schultz-Kraft, Chief Technical Officer at Glassnode, noted:
“Corrected SOPR (per hour, 7d MA), as high as it has not been since July 2019. Incoming correction?”
This trend could become disturbing if Bitcoin’s momentum slows down. Renato Shirakashi, the creator of the SOPR indicator, said that the work of Nobel laureate Daniel Kahneman shows that investors feel comfortable selling when they win.
Therefore, if Bitcoin freezes or consolidates in the near future below the resistance of $ 19,000, a slight withdrawal may occur. Shirakashi wrote:
“People in general are much more comfortable selling when they make a profit. In a bullish market, when the SOPR falls below 1, people will sell at a loss and thus are reluctant to do so. This pushes supply significantly down, which in turn puts upward pressure on the rising price. “
The increase in the ratio of exchange-stable coins from CryptoQuant coincides with the growing SOPR. The ratio of stable coins is the exchange reserves of bitcoins, divided into reserves of stable coins. As it increases, this indicates that the potential pressure on sales increases.
As such, CryptoQuant’s CEO, Ki Young Ju, expects a short-term, though not large, correction in the short term. He noted:
“BTC’s potential sales pressure is increasing, but still low. We will see some correction in a few days, but it will not be big. Long-term bullish. “
$ 19,000 set a new all-time record
Stock market order books also show that the $ 19,000 level has become an important zone of resistance. There are significant sales orders at Bitfinex, Bitstamp, Binance and Coinbase for nearly $ 19,000, which could prevent the rally from continuing.
About 19000 is quite tidy @CryptoCobain will have to withdraw big money. pic.twitter.com/KnNSzYYRnL
– Byzantine General (@ByzGeneral) November 21, 2020
Another possible factor that can cause short-term withdrawal is the Crypto Fear and Greed index. The index is still at dangerously high levels, which increases the likelihood of a correction.
The adjustment may come later
However, in the last few months, bitcoin reserves on stock exchanges have been steadily declining, according to Cointelegraph. This can compensate for a large adjustment for the whole market, especially if the BTC bit accelerates the activation of FOMO, which means a large influx of new buyers.
To date, Glassnode has found that the balance of bitcoin on stock exchanges has decreased by 18% The steady decline in foreign exchange reserves reduces the likelihood of deep declines, which analysts, such as Ki, constantly emphasized in November.
There are also other factors that could delay the correction until after Bitcoin breaks $ 19,000 or potentially even $ 20,000.
CoinMetrics data analyst Lucas Nuzzi found that the MVRV ratio, which tracks the realized bitcoin limit, is not close to the level that marked the previous peaks.
The term realized ceiling refers to the market capitalization of bitcoins at the time when investors bought BTC. If the realized upper limit is high, it means that many investors have bought BTC at a higher price.
There is therefore a strong argument for a delayed withdrawal, potentially after the ongoing rally has expanded. On November 20, Cole Garner, an online analyst, wrote:
“The liquidity of the bitcoin exchange is melting. Institutions are not prepared for a shortage like this. “