Blockchain data indicates that long-term bitcoin holders ( BTC ) are now profitable for the very first time in over a year. In the past, a return to profitability by long-term investors has been a sign of major market rallies.

According to Glassnode, the seven-day average for bitcoin’s long-term holder spend output profit ratio, or LTH SOPR, is now above 1, which was not possible until May 2022.

The SOPR is a ratio of the dollar value in U.S. dollars at the time the UTXO was created to the amount at which it was spent on the chain by the wallet. UTXOs are transaction outputs that have not been used to create a new transaction. UTXOs are like the change in your wallet.

When wallet X sends a bitcoin to wallet Y it is assumed the wallet is selling or spending coins. X has made a profit if the price at which coins were moved from X to Y is higher than when they were acquired. A SOPR above 1 indicates coins are sold on average for a profit.

The long-term SOPR is focused on coins that are moved onto the chain and have a life of at least 150 days.

The long-term SOPR variant tends reflect macromarket shifts better. After an extended period in which realized losses were experienced (LTH-SOPR > 1), the LTH group is now transitioning into a profitable spending regime, similar to previous cycle transition points,” Glassnode’s James Check wrote in a recent note.

(James Check, Glassnode) (James Check, Glassnode) (James Check, Glassnode)

Bitcoin’s recent recovery from the depths of the bear market coincides with this latest rise in the ratio above one. The cryptocurrency’s current price is $29,500. This is a 90% increase from its low of $15.460 in November.

Previous crossovers of the ratio above one, dated May 2019, May 2020 and November 2015, also coincided in recovery rallies which eventually translated into multiyear bull runs.

Chart shows that extreme readings below 1 have historically coincided with periods of investor capitulation and market bottoms. Values above 10 have been associated with market tops.

Resistance to SOPR is created by placing it above the first.

The ratio crossing above zero could indicate a positive cycle in the market, but it may also slow the rise of the cryptocurrency.

Check stated that “the LTH cohort, at this time, consists of many holders of 2021-22 cycles. Many of them remain in debt and will likely create resistance during the recovery of the market.”

CryptoQuant, a South Korean analytics firm, expressed a similar view. It said that a return to profit might put pressure on the market.

CryptoQuant, in a report that was shared with CoinDesk, said: “From an on chain data perspective bitcoin’s prices could be pressured downward by increased spending from whales (large investors) and long-term owners taking profits at the largest margin in nearly a year.”

Parikshit Miishra is the editor.