After capitulating on March 19, Bitcoin recovered on March 20. However, while the crypto community expects faster gains, even above all-time highs of around $73,800, Willy Woo, an on-chain analyst, he thinks the currency will likely consolidate in the coming days.
SOPR has reached an exceptionally high level: profit taking?
Going to X, Woo listed several metrics on the network, some of which, while supportive of prices, are counterbalanced by others that could slow the uptrend. At the top of the list, the analyst looks at how the Spent Output Profit Ratio (SOPR) reading prints.
SOPR is used to measure the profitability of Bitcoin transactions. When this happens, it suggests that more BTC being moved is in green. While this reading has increased in recent weeks of trading, the way it peaked is a concern.
In Woo’s assessment, profit-taking is likely as the SOPR peaked at an unusually “high level”. Thus, profit-taking translates into holders exiting, which means selling in place, possibly resulting in sideways consolidation.
However, the analyst finds reasons for optimism. Specifically, the recent drop from the swing high, around $73,800, was about 20%. This drop tends to be more severe compared to historical cycles and, more importantly, before the halving.
The analyst said it fell more than 30% in the last cycle before halving in 2020.
Furthermore, the analyst sees the current increase in the “macro risk signal,” a metric that compares inflows with prices of risky assets like Bitcoin and cryptocurrencies, as a positive sign. Although it is hot and rising, it could “scare” investors, rattling some before prices rise to new levels.
Bitcoin to Consolidate, Altcoins to Pump?
What is happening with Bitcoin could also impact altcoins and boost traders. Specifically, the analyst believes that altcoins will likely boom as Bitcoin consolidates into a technically bullish structure.
Still, by Woo’s assessment, the fact that leverage ratios on perpetual swap bets have not been reset means traders should be careful due to the expected volatility that marks position adjustments.
Although Woo is optimistic, predicting possible choppy price action in April, traders are optimistic. Considering the recent wave of institutional demand, the halving could increase prices in the coming sessions.
Currently, BTC bulls have reversed the March 19 losses. The coin is trading above the 20-day moving average. Optimistic traders consider $73,800 as a short- and medium-term target.
DALLE Featured Image, Chart from TradingView
Disclaimer: The article is provided for educational purposes only. It does not represent NewsBTC’s opinion on buying, selling or holding any investments and, naturally, investing carries risks. We advise that you conduct your own research before making any investment decisions. Use the information provided on this website at your own risk.
