- According to an analyst, BTC LTH SOPR has been trending below one since late May 2022.
- Mining activity on the BTC network was significantly affected by the price of the king coin.
On-chain assessment of the top coin’s performance revealed that the year-to-date (YTD) rally in Bitcoin [BTC] The price has caused the long-run production cost index (LTH SOPR) measure to rise.
According Glassnode Academythe SOPR metric is used to understand the overall market sentiment and analyze the profitability and losses incurred during a specific period for a specific crypto asset.
In addition, the index tracks the amount of profit made for all coin transactions within the chain.
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As for BTC, the LTH SOPR offers insight into the psychology of long-term holders during a bear market. When the metric is below one, it indicates that long-term holders are sensing losses and could be motivated to sell.
Conversely, when the count is above one, long-term holders make a profit and may be encouraged to hold or accumulate more BTC.
Pseudonymous CryptoQuant analyst Biggest trader noted that the bearish trend plaguing the 2022 trading year resulted in significant losses for market participants, including long-term investors under the LTH SOPR.
According to Greatest Trader, the LTH SOPR has been trending below one since late May 2022, indicating that long-term holders have consistently lost money.
However, with the general uptrend in the cryptocurrency market since the beginning of the year, “the metric started to recover and slightly increased due to the upward trend in the price of Bitcoin,” Greatest Trader found.
While this could be seen as conclusive evidence that a bull market was underway, Greatest Trader opined that:
“However, it is still too early to call the $15.5k level the bottom of the bear market, as the recent impulsive rally could just be a bull trap.”
The analyst further cautioned that it is advisable for traders and investors to keep a close eye on the SOPR metric in the near term to predict the likely price direction and market sentiment.
Source: CryptoQuant
Keep your eyes on the miners
Mining activity on the BTC network is heavily influenced by the king coin price and vice versa. According to CryptoQuant analyst Gaahminers are the only entity that requires an ongoing cost, such as electricity, so their behaviors are always tied to the price of BTC.
Therefore, studying metrics such as the Puell Multiple, which compares estimated 365-day average earnings to miners’ short-term earnings, becomes critical in determining the future direction of BTC’s price, as it offers insight into miners’ behavior.
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Gaah found that since the last local price fund in November 2022, the average income of miners has doubled compared to the previous year.
This increase in average revenue can cover mining costs, reducing the need for miners to sell their BTC and, in turn, reducing selling pressure in the market.
According to Gaah, in the short term, Puell multiples above 1.00 are necessary to gauge the likely future behavior of miners.
If average revenue continues to rise, miners may not need to sell their BTC to cover their costs. As such, it remains a key metric to pay attention to.
Source: CryptoQuant