Key Bitcoin Metric Reaches Crucial Support Level, Can Price Pull A 2021-Like Rally?

Key Bitcoin Metric Reaches Crucial Support Level, Can Price Pull A 2021-Like Rally?

May 23, 2023

The cryptocurrency market has continued to face a period of cautious sentiment as historically low levels of weekly trading volume persist this quarter.

Bitcoin, the leading cryptocurrency by market capitalization, has remained stagnant, trapped within a tight range that started on May 11. This lack of volatility has extended to Ethereum and other cryptocurrencies, contributing to overall market weakness. However, despite these prevailing market conditions, Bitcoin enthusiasts have keenly watched various pivotal developments that could potentially shake up the market.

On Tuesday, May 23, renowned onchain analyst Onchain Edge highlighted an intriguing insight for traders from the Bitcoin Spent Output Profit Ratio (SOPR). According to the former Ernest & Young (EY) analyst, aSOPR (30DMA) has surged above 1.0 and is retesting the area, signalling a potential bull run.

As ZyCrypto previously reported, this indicator has historically proved efficient, with price rallying after the ratio moves above the 1.0 mark and vice versa. According to the pundit, Bitcoin could face a major bull run, akin to the 2020 and 2021 ones, if this ratio stays atop that level.

“Want to know when to buy or sell Bitcoin? When aSOPR (30DMA) is above 1.0, it signals a profitable & strong market. Now the aSOPR is at another critical support level at 1.01. This was the level from which BTC started the 2020/21 rally.” Tweeted Onchain Edge.

Elsewhere Glassnode, another data analysis firm, likewise shared insight into the ongoing decline of the Bitcoin balance on exchanges. As per the firm, the current epoch has recorded a decline of -680K BTC. This represents a 28% decline from its peak of 3.2M BTC at its peak in 2020 to the current balance of 2.3M BTC. It is important to note that when Bitcoin leaves exchanges, it reduces the likelihood, which, in turn, may contribute to upward price pressure as the scarcity of available Bitcoin increases.

Meanwhile, various industry experts have also begun speculating that Bitcoin may have reached a bottom. Rekt Capital, a well-known figure in the crypto space, highlighted the formation of an “exaggerated” bullish divergence on the Daily RSI (Relative Strength Index). According to him, this potentially positive sign hints at the possibility of upside movement.

“A potentially positive sign for some upside movement, however important to realize that the key resistance to beat is $27,600,” he tweeted.

Material Indicators, another onchain analyst termed the ongoing sideways movement by BTC a “healthy consolidation”, which he noted strengthens the current zone as a key resistance/support area. He went on to highlight the importance of the 100-Day MA holding as strong support while cautioning that breaking the 200-Week MA could pose difficulties in reclaiming previous levels.

That said, as the crypto community eagerly awaits the market’s next move, all eyes are on Bitcoin’s price action and its ability to stand its ground against bearish pressures. At press time, BTC was trading at $27,178, up roughly 1.65% in the past 24 hours, according to data from CoinMarketCap.

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