The Spent Output Profit Ratio (SOPR) is a powerful onchain metric that reveals the profit and loss behavior of cryptocurrency holders by analyzing when coins are moved on UTXO-based blockchains 1. This metric calculates excess returns plus one based on how UTXO transactions work, providing unique insights into market sentiment by tracking the financial outcome of each transaction and helping analysts understand whether holders are realizing profits or cutting losses when they spend their coins.
What does Spend Output Profit Ratio mean?
SOPR is a metric specifically designed for UTXO (Unspent Transaction Output) blockchains such as Bitcoin, Litecoin, Zcash, Dash, Decred, XEC, and others 2. It measures the profit or loss realized when coins are spent by comparing the price at which coins were originally received to the price at which they are later spent.
UTXO transactions work by destroying and creating coins. The input destroys the coins in an address, and the output creates coins in other addresses (representing payments to recipients, change back to the sender, and transaction fees). This metric leverages this fundamental mechanism to track value flows.
The metric works by taking the price of the asset between when coins are created in an address (interpreted as the price paid) and when those coins are destroyed (interpreted as the price sold), then calculating their ratio.
The formula is elegantly simple:
\[\text{SOPR} = \frac{\text{Price on the date of destruction}}{\text{Price on the date of creation}}\]Where:
- Price on creation date: The asset’s market price when the coins were first received at the address (interpreted as the “purchase price”)
- Price on destruction date: The asset’s market price when the coins were spent (interpreted as the “selling price”)
How is Spend Output Profit Ratio used?
SOPR serves as a real-time sentiment indicator that helps traders and analysts understand market psychology. The metric reveals whether holders are currently realizing gains or losses, which can signal important market turning points.
Basic Interpretation:
- $\text{SOPR} > 1$: Holders are realizing profits when spending their coins
- $\text{SOPR} < 1$: Holders are realizing losses when spending their coins
- $\text{SOPR} = 1$: Holders are breaking even (though they still face opportunity costs)
Market Sentiment Analysis: Analysts often cross-reference SOPR with price movements to gain deeper insights into market conditions:
| Price Movement | SOPR Movement | Market Interpretation |
|---|---|---|
| Rising | Rising | Healthy uptrend with profit-taking |
| Rising | Falling | Possible accumulation or market manipulation |
| Falling | Rising | Strong holders defending support levels |
| Falling | Falling | Capitulation and panic selling |
Long-term vs Short-term Analysis: SOPR becomes even more powerful when segmented by holding periods 3. Two additional charts are typically calculated:
- Short-Term Holder (STH) SOPR: Measures profit/loss for coins held less than 155 days
- Long-Term Holder (LTH) SOPR: Measures profit/loss for coins held more than 155 days
This segmentation helps distinguish between different investor behaviors and market dynamics. The profit and loss patterns among short-term and long-term holders are often quite different, providing insights into varying market psychology across different investor types.
STH/LTH SOPR Ratio: By analyzing the ratio between short-term and long-term holder SOPR, analysts can gain additional insights into relative sentiment and behavior patterns between these two groups.
Understanding the Metric
SOPR values can be interpreted across different ranges to gauge market sentiment intensity:
| SOPR Range | Interpretation | Market Implication |
|---|---|---|
| > 1.2 | Significant profit | Potential overbought conditions |
| 1.05 - 1.2 | Moderate profit | Healthy profit-taking |
| 1.001 - 1.05 | Small profit | Slight bullish sentiment |
| 0.999 - 1.001 | Neutral | Equilibrium conditions |
| 0.95 - 0.999 | Small loss | Mild bearish pressure |
| 0.8 - 0.95 | Moderate loss | Growing selling pressure |
| < 0.8 | Significant loss | Potential capitulation/market bottom |
Consistently High SOPR (> 1):
- Indicates widespread profit-taking and optimistic sentiment among investors
- May signal overbought conditions if sustained above 1.2
- Often precedes market corrections as profitable holders exit
Consistently Low SOPR (< 1):
- Suggests widespread loss realization and extreme fear among investors
- May indicate potential market bottoms
- Often coincides with capitulation events
SOPR Around 1:
- Indicates market equilibrium and break-even conditions
- Can act as psychological support/resistance levels
- Often marks transitional periods in market cycles
Important Note for Bitcoin Analysis: For Bitcoin specifically, short-term trends typically develop over one to two weeks, while more structural trends unfold over one to three months 4. This timeframe consideration is crucial for proper interpretation of SOPR movements.
Behind the Numbers
Data Aggregation Methodology: SOPR is calculated for every individual transaction on the blockchain, then aggregated using weighted averages over specific timeframes (daily, monthly, long-term holder periods, short-term holder periods, etc.) 5. For example, daily SOPR follows this process:
- Identifies all transactions that destroyed UTXOs on a given day
- Calculates the individual SOPR for each transaction
- Computes the weighted average of all transactions for that day
- Presents the result as a single daily data point on the chart
Long-term vs Short-term Segmentation: The 155-day threshold that separates short-term from long-term holders is based on empirical analysis of Bitcoin market cycles. This timeframe typically captures one full market cycle and helps distinguish between:
- Traders and speculators (STH): More reactive to short-term price movements
- Investors and holders (LTH): More focused on long-term value accumulation
Important Limitations: While SOPR is a valuable metric, users should be aware of its limitations:
- Transaction Intent: Not all coin movements represent actual sales. Transactions may include:
- Wallet-to-wallet transfers by the same owner
- Portfolio reorganizations by exchanges or wallet services
- Mixing or privacy-related transactions
- Sample Size: SOPR is most reliable when analyzing large aggregates (thousands or millions of UTXOs). Individual transactions or small samples may not accurately reflect broader market sentiment. Therefore, SOPR is not 100% reliable for measuring sentiment, but it serves as a good proxy for actual economic behavior when examining large-scale data.
- Market Context: SOPR should be interpreted alongside other metrics and market conditions rather than used in isolation.
Data Quality Considerations: The metric’s accuracy depends on reliable price data and proper transaction classification. Our platform uses volume-weighted average prices and filters for significant transaction volumes to ensure the most accurate SOPR calculations possible.