Bitcoin (BTC) surged above $117,000 last week following the FED’s interest rate cut decision, but it kicked off the new week on a downward trend.
The drop to $112,000 indicates that further declines may be on the horizon for September, historically known as the weakest month of the year.
Alphractal’s CEO Joao Wedson pointed out three indicators signaling a bearish market sentiment and exhaustion in the current cycle.
Firstly, he highlighted that the Spent Output Profit Ratio (SOPR) Trend Signal is showing bearish signs.
SOPR assesses whether Bitcoin transactions are profitable or not on-chain. A value above 1 suggests sellers are making profits, while below 1 indicates losses for sellers.
The current SOPR trend is downward even though it remains above 1, indicating diminishing profitability from on-chain transactions.
“The SOPR signal serves as a valuable tool to identify declining blockchain profitability. Never before have investors accumulated so late and at such high prices in Bitcoin’s history.”
The analyst also mentioned that short-term investors’ realized price stands at $111,400 near current market levels. A drop below this level could trigger stop-loss sell orders.
Despite Bitcoin’s higher price compared to previous cycles, its Sharpe ratio is weaker now according to recent analysis. This implies lower risk-adjusted returns and reduced profit potential overall.
Joao Wedson emphasized that these three indicators point towards a decline in Bitcoin prices and predicted an increase in social interest driven by altcoins rather than Bitcoin itself.
*This is not investment advice.