SOPR (Spent Output Profit Ratio) is an on-chain metric that measures whether Bitcoin holders are selling their coins at a profit or loss. Created by analyst Renato Shirakashi, SOPR calculates the ratio between the price at which coins are sold and the price at which they were originally acquired.
The calculation is straightforward: SOPR divides the realized value (current price) by the value at creation (purchase price) for all coins moved on-chain during a specific period.
5 Key Takeaways
SOPR measures actual profitability by comparing sale prices to purchase prices. Values above 1 mean holders are selling at profit, below 1 means selling at loss, revealing true market psychology beyond price alone.
The 1.0 level acts as a critical pivot point where consistent movement above or below this threshold often marks transitions between bull and bear markets.
Adjusted SOPR filters out exchange noise and same-day trades by excluding transactions under one hour old, providing cleaner and more reliable signals for trading decisions.
Long-term holder SOPR reveals smart money behavior and macro cycle timing, while short-term holder SOPR shows immediate market sentiment, panic selling, and FOMO buying patterns.
SOPR works best when combined with complementary metrics like MVRV ratio, exchange flows, and NUPL for confirming market cycle positions and avoiding false signals.
How SOPR Works
When Bitcoin investors move their coins, the transaction reveals critical information about their profitability. SOPR captures this data across the entire network to produce a single ratio:
SOPR > 1: Coins are being sold at a profit
SOPR = 1: Coins are being sold at break-even
SOPR < 1: Coins are being sold at a loss
For example, if you bought Bitcoin at $30,000 and sold it at $40,000, your individual contribution to SOPR would be 1.33 (40,000 ÷ 30,000). Aggregate this across thousands of transactions, and you get the daily SOPR value.
Why SOPR Matters for Market Analysis
SOPR reveals the psychological state of the market by showing whether holders are willing to realize losses or take profits. This makes it a powerful tool for identifying market tops and bottoms.
During bull markets, SOPR consistently stays above 1 as investors sell into strength. During bear markets, SOPR frequently dips below 1 as capitulation occurs. The transitions between these states often signal major trend changes.
The metric also filters out same-day trading activity, focusing only on coins that have moved after being held for at least one hour. This eliminates noise from high-frequency trading and exchange transfers.
SOPR as a Market Cycle Indicator
Historical data shows SOPR behaves predictably during different market phases:
Bull Market Behavior: SOPR remains elevated above 1, occasionally dipping to touch the 1.0 level during corrections. These dips to 1.0 often present buying opportunities, as holders refuse to sell at a loss even during temporary downturns.
Bear Market Behavior: SOPR frequently trades below 1 as investors capitulate and realize losses. When SOPR begins consistently holding above 1 after an extended period below it, this often signals the start of a new bull cycle.
Market Tops: Extreme SOPR readings above 1.1 or higher indicate widespread profit-taking and can precede major corrections.
Market Bottoms: When SOPR drops significantly below 1 and then begins to recover back above it, this often marks capitulation bottoms where weak hands have exited.
Adjusted SOPR (aSOPR)
Adjusted SOPR modifies the standard calculation by excluding all transactions with a lifespan of less than one hour. This variant provides a cleaner signal by removing:
Exchange deposits and withdrawals
Same-day trading activity
Operational transfers that don’t represent actual holder decisions
aSOPR is generally preferred for serious analysis because it focuses exclusively on economic decisions made by actual holders rather than technical movements.
Trading Strategies Using SOPR
Mean Reversion Strategy: When SOPR drops below 1 during a bull market, this represents holders selling at a loss—a relatively rare occurrence. These moments often provide entry opportunities as the market typically reverts to profitability.
Trend Confirmation: Rising SOPR in an uptrend confirms buyer strength and profit realization. Falling SOPR during an uptrend may indicate weakening momentum before price reflects it.
Divergence Analysis: When price makes new highs but SOPR fails to reach previous peaks, this bearish divergence suggests profit-taking is diminishing and momentum may be fading.
Capitulation Identification: Extended periods of SOPR below 1, followed by a sustained move back above 1, often marks the end of bear markets as sellers exhaust themselves.
Limitations and Considerations
SOPR has blind spots that analysts must account for:
Lost Coins: Bitcoin sent to inaccessible wallets appears as very old coins when eventually moved, potentially skewing SOPR readings.
Exchange Activity: Despite filtering attempts, some exchange-related activity may still influence SOPR, particularly during high-volume periods.
Manipulation Potential: Large holders can theoretically influence SOPR by moving coins between their own wallets, though this is economically impractical given transaction fees.
Lag Effect: SOPR is a lagging indicator based on actual transactions. It confirms what has happened rather than predicting what will happen.
Context Dependency: SOPR readings mean different things in different market contexts. A value of 0.98 may signal buying opportunity in a bull market but could indicate further downside in a bear market.
Practical Application for Different Investor Types
Long-Term Holders: Monitor LTH-SOPR to gauge when patient capital is exiting. When long-term holders begin taking profits (LTH-SOPR rises significantly), consider reducing exposure or taking partial profits.
Swing Traders: Use aSOPR pullbacks to 1.0 during uptrends as entry signals. Exit when SOPR reaches extreme highs (>1.1) combined with other overbought indicators.
Risk Managers: Track how long SOPR remains below 1. Extended periods suggest deep bear markets where risk should be minimized until sustained recovery above 1 occurs.
Conclusion
SOPR provides quantitative insight into Bitcoin holder psychology by measuring realized profitability across all on-chain transactions. Its strength lies in revealing when holders are willing to sell at losses (capitulation) or aggressively taking profits (distribution), both critical inflection points for market trends.
While not a standalone trading system, SOPR forms a crucial component of comprehensive on-chain analysis. Traders who understand its nuances—particularly the differences between adjusted and unadjusted versions, and between short-term and long-term holder behavior—gain significant edge in timing entries and exits during Bitcoin’s volatile market cycles.
