Bitcoin (BTC) Price Correction Incoming as Key On-Chain Metric Trends Towards Historically 'Dangerous” Levels

Bitcoin (BTC) price might be due for a correction as the value of a key on-chain metric trends toward historically “dangerous” levels, CryptoQuant analyst Woo Minkyu found in a new report.

Bitcoin’s [BTC] price might be due for a correction as the value of a key on-chain metric trends toward historically “dangerous” levels, a new report by CryptoQuant analyst Woo Minkyu has found.

According to Minkyu’s analysis of BTC’s Adjusted Spent Output Profit Ratio (aSOPR) using a 200-day moving average, the metric's approach to 1.08 puts the leading coin at risk of a price correction.

BTC’s aSOPR measures the profit or loss realized when the coin is spent by its holders. An aSOPR value above 1 signifies that coins are being sold at a profit overall. Conversely, a value below 1 suggests that investors are selling at a loss.

At the time of writing, the coin’s aSOPR was 1.03, indicating that BTC holders are currently recording profits from selling their coins.

As AMBCrypto reported earlier, despite the significant resistance faced at the $71,000 price level, over 87% of BTC’s circulating supply is held in profit.

However, according to Minkyu, an increase in BTC’s aSOPR value toward 1.08 signals a potential risk of a price decline.

“However, historical data suggests that when this indicator approaches 1.08, Bitcoin prices tend to enter a correction phase. Considering past instances where similar patterns were observed, there is a possibility that the current situation might follow the same trend,” the analyst noted.

Bitcoin continues to trend within a range

At press time, BTC was trading at $64,584. It has trended within a horizontal channel since 20 May, bouncing between resistance at $71,926 and support at $64,529.

A horizontal channel is formed when an asset’s price consolidates within a range for a period of time. This narrow oscillation occurs when a relative balance between buying and selling pressures prevents the price from trending strongly in either direction.

BTC’s declining Average True Range confirms the consolidation phase. According to AMBCrypto's findings, the value of this volatility marker has decreased by 28% since 20 May.

This indicator measures market volatility by calculating the average range between high and low prices over a specified number of periods.

When it falls, it suggests lower market volatility and hints that the asset’s price is trending within a range.

However, despite BTC currently trending within a range, the market’s bearish influence is still significant. This is evident from the reading on the coin’s Directional Movement Index (DMI).

Source: TradingView

Read Bitcoin’s [BTC] Price Prediction 2024-25

At the time of writing, the coin’s negative directional index (red) was resting above its positive index (green).

An asset’s DMI measures the strength and direction of an asset’s price trend. When set up this way, it indicates that the bearish trend is stronger than the bullish trend. This suggests a higher likelihood of a downtrend compared to an uptrend.

News source：https://www.kdj.com/cryptocurrencies-news/articles/bitcoin-btc-price-correction-incoming-key-chain-metric-trends-historically-dangerous-levels.html

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