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A key indicator to track on-chain spending behavior and current market sentiment is the Spent Output Profit Ratio (SOPR). SOPR is calculated by dividing the realized value of a spent output (in USD) by the value at creation of the original. Simply put, it’s calculating the price sold over price paid for every UTXO that moves on-chain. The best place to read more on SOPR is here.
SOPR values better than 1 point out that on common, extra revenue is being realized whereas SOPR values lower than 1 point out that on common, extra losses are being realized. At a price of 1, the market is web impartial. We are able to analyze SOPR habits at a complete market stage and throughout long-term holders (LTHs) and short-term holders (STHs).
What to search for within the SOPR metric is the metric’s response round 1. Throughout continued bull-cycle rallies, we persistently see extra profit-taking habits beneath 5% with these in-between durations when the market is impartial or break-even. You may see when SOPR bounces off of 1 and again to a state of revenue taking throughout bull markets. When it falls under 1 and doesn’t reclaim that stage, the market is signaling a bull market reversal forming as buyers notice extra losses, anticipating value to go decrease. Right here, we use the Adjusted SOPR which ignores all outputs with a lifespan of lower than one hour.
Supply: Glassnode
As we strategy the tops of bull cycles, there are usually sustained, elevated ranges of revenue taking proper earlier than increased peaks. Ultimately, the spent provide overwhelms new demand, and due to this fact a prime varieties. Presently, we’re seeing elevated revenue taking however not on the stage of a cycle prime or peak.
In earlier cycles, there’s a rising development of long-term holders realizing elevated earnings as value is bid up by new market entrants. Utilizing a 30-day transferring common to take a extra macro view of the market, we glance to have simply began this elevated development of LTH revenue taking. Revenue taking is a wholesome signal indicating the second stage of the bull market, distribution over accumulation, is starting.
Supply: Glassnode
For brief-term holders, there’s a constant development of habits throughout corrections in bull cycles. As value corrects, weaker arms capitulate and notice losses which places extra promote strain available on the market. We usually see the STH SOPR quantity reclaim a place again over 1 after this occasion, as new consumers are shaken out. Not reclaiming 1 would sign that the bigger market of short-term holders will not be prepared to carry cash and moderately wish to promote them at a loss. For bull market cycles to proceed, we’re trying to see the most recent STH SOPR reclaim again over 1 when utilizing the 24-hour MA chart. It’s already exhibiting indicators of doing so:
Supply: Glassnode
