Historically reliable indicator suggests bottom is already in for Bitcoin during recent pull-back
The Bitcoin Spent Output Profit Ratio suggests that the lows are already in for this recent pull-back...
There seems to be no shortage of people out there thinking that bitcoin needs to go lower first before it can start going higher again.
In fact, you can probably find many of them reading this blog, yep I'm looking at you @edicted and @frot.
However, there is yet another metric/indicator suggesting that they may be waiting quite a long time for their drop back to the old highs ($20k).
The Spent Output Profit Ratio (SOPR) is flashing a buy signal for the market as it has dropped back to a reading of 1.
Check it out:
(Source: https://twitter.com/woonomic/status/1353061615101382658/photo/1)
For some context, the Spent Output Profit Ratio measures the profit ratio of bitcoin moved on-chain. It is calculated from spent outputs with a realized USD value being divided by the value at the creation of the output.
In layman's terms, it's the price sold divided by the price paid.
The idea is that when less bitcoin is currently in profit and can only be sold at a loss the price tends to move higher from there.
Cool, so why should we pay attention to this metric?
Based on historical patterns, when the SOPR metric falls to 1 or lower during a bull market, that has typically marked a local bottom.
Which is exactly what we are seeing right now.
The SOPR hit a value of 1 the other day and if history is any indication, the price should be heading higher in the not too distant future.
As mentioned above, a drop below 1 signals that bitcoin holders are cashing out their holdings at a loss during a market downturn, while a value above 1 indicates that the owners of the spent outputs are in profit at the time of the transaction.
When the ratio drifts back towards 1 in a bull market, it's time to buy and inversely when the ratio drifts up towards 1 in a bear market, it's time to sell.
While this does not guarantee that bitcoin cannot drop further, it does put another feather in the cap of those thinking the lows are likely already in for this most recent pullback.
Endowments getting into Bitcoin?
In other news, it appears Harvard, Yale, Broan, and the University of Michigan are all buying bitcoin right now...
More on that can be seen here:
Most of the specifics are unknown at this point, but the potential of them getting involved is certainly huge.
From the Coindesk article:
"Harvard’s is the largest university endowment with over $40 billion in assets. Yale has over $30 billion, Michigan has about $12.5 billion, while Brown holds $4.7 billion. It is unknown how much each fund has allocated in crypto but it is likely a fraction of percent of their total assets."
Bitcoin may dip lower than those $29k lows, though I suspect they won't, but either way it is likely to be significantly higher in the coming months.
If we get another dip it's probably a good spot to be picking up some bitcoin, if we don't, hopefully you were buying on this most recent one.
With the Bitcoin for Corporations Event now roughly a week away, the dip may not last long...
Stay informed my friends.
-Doc