A reversal in the Bitcoin (BTC) price is likely based on several data points in the chain, such as SOPR, stable currency flows, compound sales orders to $ 19,000 and the crypto-fear index. The question remains, however, when this correction will take place.
Reduced profits are possible with less buying pressure
SOPR basically measures how profitable bitcoin holders are today. When SOPR is high, BTC risks reducing profitability because traders tend to sell when they make a profit.
Stablecoin flows meanwhile show how many stablecoins like USDT Tether go to exchanges. When stable currency flows increase, this usually means an increase in consumer demand. On the other hand, selling pressure tends to increase when BTC reserves exceed the stable flow of the currency.
In recent days, SOPR has reached a level that previously led to a correction in the bitcoin price, as it did in late 2018 and summer 2019.
November 20, Glassnode CTO Rafael Schultz Kraft notes:
“The adjusted SOPR (moving average per hour, 7 days) is at the highest level not seen since July 2019. Is it possible to correct? ”
This trend could lead to concern if Bitcoin’s movement slows. Renato Shirakashi, creator of the SOPR index, said that the work of Nobel laureate Daniel Kahneman shows that investors feel comfortable selling when they earn.
Thus, if Bitcoin stagnates or consolidates in the short term below the resistance level of $ 19,000, a small withdrawal may occur. Shirakashi wrote:
People usually feel more comfortable selling when they make money. In a beef market, when SOPR falls below 1, people will sell at a loss and are therefore reluctant to do so. This significantly reduces supply, which in turn increases the pressure on price. ”
The increase in CryptoQuant ETF percentage coincides with the increase in SOPR. The Stablecoin ratio is the foreign exchange reserves of bitcoins divided into stable currency reserves. When it rises, it means a potential increase in sales pressure.
As such, CryptoQuant CEO Ki Yong Joo expects a short-term, though not major, short-term correction. This is without:
“The potential selling pressure for bitcoin is growing, but still low. We will see some correction in a few days, but it will not be significant. In the long run, optimistic. ”
$ 19,000 is on its way to a new full-time job
The trading book also shows that the $ 19,000 level has become an important area of resistance. Bitfinex, Bitstamp, Binance and Coinbase have large sales orders of around $ 19,000, which can prevent the rally from continuing.
Another potential factor that could trigger a short-term decline is the Crypto Fear and Greed Index. The index stays at dangerously high levels, which increases the probability of a correction.
The solution may come later
In recent months, however, bitcoin reserves on stock exchanges have shown a steady downward trend, according to the Cointelegraph. This may offset a major market correction, especially if the increase in BTC picks up faster, leading to FOMO, which means a large influx of new buyers.
Since the beginning of the year, Glassnode has discovered that bitcoin exchanges have fallen 18%. The continued contraction in foreign exchange reserves reduces the likelihood of a deep fall, as analysts such as Key consistently reiterated in November.
Also, there are other factors that can delay the correction to Bitcoin falling $ 19,000, or maybe even $ 20,000.
CoinMetrics Network analyst Lucas Nosy found that the MVRV ratio, which tracks the maximum bitcoin reached, is not close to the level seen by previous peaks.
The term “reached ceiling” refers to the market value of bitcoins at the time of the purchase of bitcoins by investors. If the maximum achieved is high, it means that many investors bought BTC at a higher price.
Therefore, there is good reason for a delayed withdrawal, probably after the persistent rally has expanded too much. On November 20, Cole Garner, a series analyst, wrote:
“The liquidity of the bitcoin exchange disappears. The institutions are not ready for such a shortage. “