Cryptocurrency analytics firm Alphractal has released a market update stating that Bitcoin could be entering a prolonged consolidation phase based on the Spent Output Profit Ratio (SOPR) Trend Signal.
The SOPR Trend Signal, which measures transaction profitability on the blockchain, has historically provided insight into market sentiment. According to Alphractal, when the signal turns red, it indicates that many addresses are making significant profits. If the metric rises above the upper threshold, it usually serves as a bearish warning for Bitcoin.
“In previous cycles, two consecutive red signals preceded market weakness and in some cases signaled the beginning of a bear market,” Alphractal said.
Alphractal specifically emphasized that this does not signal the end of the current bull cycle, despite the expected decline in trading profitability throughout 2024 and 2025. They pointed to late 2021, when a similar SOPR decline occurred, but Bitcoin still managed to surpass its April 2021 peak and reach a new all-time high of $69,000.
Alphractal suggests that Bitcoin’s most profitable phase may have already passed, especially following the December 2024 peak when the SOPR Trend Signal reached its highest level. Looking forward, they expect lower returns from on-chain activity, potentially supporting a market consolidation phase in the coming months.
*This is not investment advice.
