Cryptocurrency Market Update

Cryptocurrency analytics firm Alphractal has released a market update indicating that Bitcoin could be entering a prolonged consolidation phase based on the Spent Output Profit Ratio (SOPR) Trend Signal.

The SOPR Trend Signal measures transaction profitability on the blockchain and has historically provided insights into market sentiment. Alphractal notes that when the signal turns red, it suggests that many addresses are making significant profits. If the metric rises above the upper threshold, it typically serves as a bearish warning for Bitcoin.

>“In previous cycles, two consecutive red signals preceded market weakness and in some cases signaled the beginning of a bear market,” Alphractal stated.

Despite this, Alphractal emphasizes that this does not indicate the end of the current bull cycle, despite anticipated declines in trading profitability throughout 2024 and 2025. They reference late 2021, when a similar SOPR decline occurred, but Bitcoin still surpassed its April 2021 peak, reaching a new all-time high of $69,000.

Alphractal suggests that Bitcoin’s most profitable phase may have already passed, especially following the December 2024 peak when the SOPR Trend Signal reached its highest level. Looking ahead, they expect lower returns from on-chain activity, potentially supporting a market consolidation phase in the coming months.

*This is not investment advice.