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4 metrics suggest bitcoin price will be corrected, but will it hit $ 20,000 first?

November 21, 2020

We can see a trace of the price of Bitcoin (BTC) based on multiple on-chain data points, in particular the SOPR (Spent Output Profit Ratio) indicator, stable coin inflows, the large number of sell orders at USD 19,000 and the Crypto Fear and Greed Index. But still, The question remains when such a correction would take place.

Withdrawal by taking back profits is possible with less buying pressure

The SOPR indicator essentially measures how many Bitcoin holders are currently making profits. When the SOPR is high, BTC is at risk of withdrawing from the profit withdrawal as traders tend to sell when they are in the profit zone.

Bitcoin SOPR adapted. Source: Glassnode

Meanwhile, Stablecoin entries show how many stablecoins such as Tether (USDT) are flowing on exchanges. Generally, as the inflows of stable coins increase, it means that demand from buyers is increasing. On the other hand, selling pressure tends to increase when BTC reserves exceed stable coin inflows.

4 metrics suggest bitcoin price will be corrected, but will it hit $ 20,000 first?
4 metrics suggest bitcoin price will be corrected, but will it hit $ 20,000 first?

In the last days The SOPR indicator reached a level that previously caused the price of Bitcoin to correct. like the end of 2018 and summer 2019.

20th November Rafael Schultz-Kraft, Head of the technical department of Glassnode, he showed::

“The adjusted SOPR (hourly 7-day moving average) is as high as it has been since July 2019. Correction on the way?”

This trend can become worrying as Bitcoin’s momentum slows. Renato Shirakashi, The creator of the SOPR indicator said that the work of Nobel Prize winner Daniel Kahneman shows that investors like to sell when they make a profit.

So, If Bitcoin blocks or consolidates below the USD 19,000 resistance for a short period, a small pullback may occur. Shirakashi wrote:

“People are generally much more comfortable selling when they are making a profit. In a bull market, when the SOPR falls below 1, people would sell at a loss and therefore would be reluctant to do so. This pushes the supply down significantly, which in turn pushes the price up and leads to an increase in the price. “

The increase in CryptoQuant’s Exchange Stablecoins Ratio coincides with the increase in SOPR. The stablecoins ratio is the bitcoin reserve of an exchange divided by the stablecoin reserve. When it increases, it shows that the potential selling pressure is increasing.

Average stablecoins per BTC. Source: CryptoQuant

The CEO of CryptoQuant, Ki Young Ju, expect a short-term correction, although it won’t be a large one. He showed::

“The potential selling pressure on BTC is increasing, but slowly. We’ll see a correction in a few days, but it won’t be big. Bullish over the long term.”

$ 19,000 stands in the way of a new all-time high

Exchange order books also show that the $ 19,000 level has become a major area of ​​resistance. There are large amounts of sell orders on Bitfinex, Bitstamp, Binance and Coinbase close to $ 19,000 that could prevent the rally from continuing.

Another possible factor that could trigger a short-term withdrawal is that Fear and Greed crypto index. The index is still at dangerously high levels, This increases the likelihood that we will see a correction.

Correction could come later

However, in the last few months Bitcoin stocks from exchanges are continuously declining. as Cointelegraph reported. This could offset a significant correction across the market, especially if BTC’s bull run accelerates and triggers the FOMO in the market, which means a large influx of new buyers.

So far this year Glass knot discovered that the Bitcoin account balance on the exchanges has fallen by 18%. The ongoing decline in foreign exchange reserves reduces the likelihood of large withdrawals, which analysts like Ki have insisted on throughout November.

90-day moving average of Bitcoin account balances on exchanges. Source: CryptoQuant

In addition, there are other factors that can delay the correction until then Bitcoin tops $ 19,000 or even $ 20,000.

The CoinMetrics Network Data Analyst, Lucas Nuzzi, he found This market value to realized value, which replicates Bitcoin’s realized capitalization, is nowhere near the level that it had marked at previous highs.

The term realized capitalization refers to the market capitalization of Bitcoin at the time of the purchase of BTC by investors. If the realized capitalization is high, it means that many investors bought BTC at a higher price.

Hence there is a strong case for a later rollback. possibly after the current rally has spread too long. On November 20, Cole Garner, an on-chain analyst, wrote::

“Bitcoin liquidity on the exchanges is running out. Institutions are not prepared for such a deficiency. “