Indicators suggest that reversal is coming

by James · August 16, 2022

Be[In]Crypto takes a look at Bitcoin (BTC) on-chain indicators, specifically Spent Output Profit Ratio (SOPR) and RHODL Ratio.

Table of Contents

BTC SOPR

SOPR is an on-chain indicator that shows whether the market is in a state of profit or loss. Measurements above one (black line) show that the market has made a total profit, while those below one show a total loss.

The main characteristic of bullish trends is that the SOPR bounces on the one line instead of falling below it.

The SOPR broke below one (black circle) in January 2018. This suggested that the bullish trend had come to an end. Afterwards, the bottom was reached on 11 December of the same year, with a reading of 0.86. The bottom was reached 11 months after the first collapse.

In the current bull run, SOPR broke below one in May 2021 (red circle). On June 18, it reached a value of 0.928. This is the third lowest value ever, and is only higher than those of December 2018 and March 2020. The lowest value was reached 13 months after the SOPR first broke below one.

After the 2018 bottom, SOPR moved above one on 5 April 2019. This confirmed that the bottom is in. Currently, the SOPR made an attempt to break out above the one line on August 5 (red arrow). While the attempt was unsuccessful, the indicator is preparing for another breakout attempt.

If the SOPR were to move above one, it would confirm that the bottom is in.

RHODL relationship

The RHODL ratio is an indicator created by the ratio of the one-week and 1-2 year HODL wavebands. Readings above 50,000 (highlighted in red) indicate that a significant percentage of the BTC supply is in the hands of short-term holders.

This reading is generally associated with peaks, as was the case for the 2013 and 2017 peaks. However, this was not the case in the 2021 peak, which was made at around 14,000.

The RHODL ratio is currently at 360, which is slightly above the 350 ratio that is considered oversold. It is worth mentioning that the RHODL ratio dipped below 350 on August 11 before finally moving above it.

Historically, declines in oversold territory and subsequent increases above it have been a sign of market bottoms.

Also, it is possible to draw an ascending support line connecting the 2015 and 2019 lows. If the line holds, it would indicate that the ratio has bounced on the line again and confirmed the bottom of the BTC market.

For Be[in]Crypto’s latest Bitcoin (BTC) analysis, click here

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