The SOPR (Spent Output Profit Ratio) indicator was introduced this year as a proxy for overall market profit and loss using blockchain data, and is now live and freely accessible for the first time via Glassnode Studio. It helps us to understand the state of economics in the Bitcoin ecosystem, highlighting when the average stakeholder is in a state of profit or loss.
SOPR represents the profit ratio of coins moved on-chain, measured through the variation between purchase price and sale price. It is calculated by dividing the realised value of a spent output (in USD) by the value at creation (in USD).
As such, a SOPR value of greater than 1 implies that people are, on average, selling at a profit (because the price sold is greater than the price paid). Likewise when SOPR is below 1, this implies that people would be selling at a loss.
Using SOPR to Predict Price Movements
By examining SOPR, we can identify interesting patterns during bull and bear markets.
During bull runs, the market quickly corrects prices which drive the SOPR value below 1 (i.e. prices which mean people are selling at a loss). This is likely due to increased confidence that prices will continue to rise during a bull market, so it would be irrational to sell at a loss when gains are imminent.
Conversely, in bear markets, the market quickly corrects prices which push the SOPR value above 1 (i.e. prices at which profits are being made). This is likely due to fear that prices will continue going down, so selling at break-even point is seen as a good result.
These correlations with price movements are only the beginning of a range of analyses that can be done on top of SOPR. From today, the SOPR metric is publicly viewable on Glassnode Studio, and the raw data is available via our Glassnode API. The data is viewable back to January 2013, and will be updated on a daily basis.
We will continue adding metrics which shed further light on the value of SOPR as a method of analysing on-chain data. We will also release further commentaries and deeper reports based on SOPR through our publishing platform, Glassnode Insights.
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Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.