What is SOPR?
The Spent Output Profit Ratio (SOPR) measures the profit/loss ratio of all spent Bitcoin outputs. It compares the price at which coins were last moved to the price at which they were originally acquired, providing insights into market-wide profit-taking and capitulation behavior.
How SOPR is Calculated
The calculation involves:
- Realized Value: Sum of (output value × price when spent)
- Realized Price Paid: Sum of (output value × price when acquired)
- SOPR: Realized Value ÷ Realized Price Paid
- Interpretation: >1 = profitable spending, <1 = loss-taking
Why SOPR Matters
- Market Sentiment: Shows whether holders are taking profits or cutting losses
- Capitulation Signals: Extreme low values indicate panic selling
- Distribution Phases: High values suggest profit-taking at peaks
- Accumulation: Values around 1 indicate balanced market activity
- Network Health: Reflects overall holder profitability
Multiple SOPR Variations
There are several SOPR variants: aSOPR (adjusted), SOPR (raw), and STH-SOPR (short-term holder). Each provides different insights into holder behavior across timeframes.
SOPR Value Interpretation
Above 1.0 - Profitable Spending
Market conditions when SOPR > 1:
- Holders are spending coins at a profit
- Indicates confidence and profit-taking
- Often seen during bull market peaks
- Can signal distribution phases
Around 1.0 - Break-Even
Balanced market activity:
- Mix of profitable and unprofitable spending
- Normal market conditions
- Neither extreme accumulation nor distribution
- Healthy market equilibrium
Below 1.0 - Loss-Taking
Capitulation and distress:
- Holders selling at a loss
- Can indicate panic selling
- Often signals market bottoms
- Extreme lows suggest capitulation
Key SOPR Levels
Critical thresholds to watch:
- SOPR > 1.05: Strong profit-taking, potential market top
- SOPR = 1.00: Break-even point, neutral
- SOPR < 0.95: Loss-taking begins
- SOPR < 0.75: Heavy capitulation, potential bottom
- SOPR < 0.50: Extreme panic selling
Market Cycle Correlations
Bull Markets
During bull runs:
- SOPR tends to rise with price
- Peaks often precede or coincide with market tops
- Values above 1.1 signal euphoria
- Declines can signal trend exhaustion
Bear Markets
During bear markets:
- SOPR drops significantly
- Values below 0.8 indicate capitulation
- Can stay low for extended periods
- Recovery above 1.0 signals potential bottom
SOPR vs Other Indicators
SOPR vs MVRV
Key differences:
- SOPR: Measures realized profits/losses of spent coins
- MVRV: Compares market cap to realized cap
- Complementary: SOPR shows active selling, MVRV shows holding
- Timing: SOPR leads during capitulation phases
SOPR vs NUPL
Profit/loss analysis:
- SOPR: Realized profits of spent outputs
- NUPL: Unrealized profits of all coins
- Action vs Potential: SOPR shows what's happening, NUPL shows what's possible
Trading Applications
Entry Signals
Use SOPR for:
- Identifying capitulation bottoms
- Confirming profit-taking at tops
- Timing entries during extreme readings
Risk Management
Risk indicators:
- Extreme lows may signal continued downside
- Sustained highs indicate distribution
- Divergences with price action
Limitations and Considerations
Important caveats:
- Exchange flows can distort readings
- Privacy coins affect accuracy
- Address clustering challenges
- Not all spending represents profit-taking
- Time-based analysis limitations
SOPR Variants
aSOPR (Adjusted SOPR)
Enhanced calculation:
- Excludes exchange-related transactions
- More accurate for retail behavior
- Less affected by arbitrage flows
STH-SOPR vs LTH-SOPR
Holder type analysis:
- STH-SOPR: Short-term holders (higher volatility)
- LTH-SOPR: Long-term holders (more stable)
- Combined: Overall market sentiment
Historical Patterns
Evolution of profit-taking:
- 2013-2015: Extreme volatility with clear capitulation signals
- 2016-2017: ICO boom affected spending patterns
- 2018-2019: Prolonged bear market with extended low SOPR
- 2020-2021: DeFi summer influenced spending behavior
- 2022: Heavy capitulation during crypto winter
Future Developments
Evolving metrics:
- Enhanced privacy adjustments
- Cross-chain SOPR analysis
- Real-time SOPR tracking
- AI-powered pattern recognition
Conclusion
SOPR provides crucial insights into Bitcoin market sentiment by measuring the profit/loss dynamics of spent outputs. Understanding when holders are taking profits versus cutting losses helps identify key market turning points and assess overall market health.