What is SOPR

SOPR, or Spent Output Profit Ratio, is an indicator that reflects the profit/loss level of an asset. It can be used to determine whether the selling price of an asset is higher than the purchase price. If the asset’s selling price is higher than the purchase price, it indicates a profit sale; conversely, it indicates a loss sale. SOPR is usually observed on a daily basis and is used to assess the profit and loss situation within the same day.

Specific factors of the formula:

The calculation method of SOPR is the asset’s selling value (in USD) divided by the asset’s purchase value (in USD).

Value = Circulating supply of the asset within a specific period (usually 1 day)

Price (spent) = Asset selling price

Price (created) = Asset purchase price

Specific analytical uses:

SOPR compares Bitcoin’s selling value and purchase value on the same day to calculate its profit or loss ratio. It captures market profit/loss within a specific period and reflects macro market sentiment. It can also provide buy/sell signals for investors.

SOPR value greater than 1: Assets are sold profitably on that day (selling price exceeds purchase price).

SOPR value less than 1: Assets are sold at a loss on that day (selling price is lower than purchase price).

SOPR value greater than 1 and continuously rising: Asset prices are rising, and the market is continuously profitable. The market is approaching a top and then begins to decline, which is a sell signal.

SOPR value less than 1 and continuously falling: Asset prices are declining, and the market is continuously losing. The market is approaching a bottom and then begins to rise, which is a buy signal.

In practical analysis, people often use a variant of SOPR called aSOPR to improve accuracy. aSOPR excludes Bitcoin transactions with a duration of less than 1 hour. This makes its reflection more pronounced than SOPR. It better displays the profit/loss situation and market trend of assets, while providing clearer buy/sell signals.

Historically, SOPR values between 1.04 and 1.07 indicate a market top; between 0.88 and 0.96 indicate a market bottom. For example, on November 10, 2022, affected by the FTX bankruptcy event, Bitcoin’s price dropped to $16,000. SOPR rapidly declined from 0.99, bottoming out at 0.87. After SOPR bottomed out, Bitcoin’s price gradually recovered to above $20,000. **$SOON **$BGSOL **$SOLO **