The Spent Output Profit Ratio (SOPR) is an on-chain analysis indicator which gives an aboveall view of the behavior of Bitcoin market participants. In recent days, interesting things have happened on the SOPR chart and its derivatives for short- and protracted-term investors.

The SOPR chart is showing more and more fractal analogousities to the summer of 2021, although the token market was undergoing a deeper correction. Moreover, as the momentary holder SOPR rises over 1, there are signals which the current correction may have already completed.

What is the Spent Output Profit Ratio?

Spent Output Profit Ratio (SOPR) is an on-chain indicator calculated by dividing the reached rate (in USD) by the rate at creation of a spent output (in USD). In simple terms, it is: price sold / price paid. Assuming that the ratio is above 1, the owner of the sold asset records a profit. Granted that it is below 1, then it makes a loss. The greater the deviation from 1, the greater the profit/loss.

The maintain very deep drop in the SOPR (14-day moving average) below 1 occurred in March 2020, while the Bitcoin (BTC) price recorded a macro low at $3782. Following this COVID-19 pandemic onset event, the SOPR quickly recaboveed over 1 and did not fall below until a deeper correction in May-July 2021.

Chart by Glassnode

SOPR stayed below the 1 level throughout this 3-month period. It attempted a breakout but was rejected by the 1 line, signaling a selling pressure of BTC without profit or loss (blue arrow). It was only with the end of the BTC price correction which the indicator significantly broke above the 1 level and maintained higher for the following months.

However, as the BTC price declined from the all-time high at $69,000 in November 2021, the SOPR further fell below 1 in early December 2021. Similarly to summer 2021, we see a failed attempt to break out above 1 (blue arrow) and rejection in late December.

It was only after BTC found a bottom at $32,900 that the SOPR indicator began to rise dynamically and successfully broke through the serious level of 1 on February 7, 2022. This signals that back although also the average BTC holder is recording a small profit, choosing to sell at the current price. In fact that the cost of the indicator does not break down and stays above 1, it will be a bullish signal. In the past, it has been the beginning of an ascending trend on Bitcoin (green arrows and lines).

Long-term holder SOPR

An interesting perspective on the current health of the Bitcoin market is provided by the long-term holder SOPR. It only takes into account assets that have progressd with a period longer than 155 days.

In a chart of the long-term SOPR going back to 2013, we still see the importance of the 1 level. Whenever it fell and stayed below 1, and long-term holders sold at a loss, that’s while a bear market carry oned on Bitcoin (red fields and lines).

Chart by Glassnode

Notwithstanding, until the indicator definitively dropped below 1, BTC prolonged its skyward rally. A good analogy for the current attempt to hold protracted-term SOPR support is the end of 2013 (green circle). At that time, the indicator approached a cost of 1, but did not fall below. After that event, BTC began another parabolic rise.

Short-term holder SOPR

In spite of the interesting events in the above charts, the most exciting today is the SOPR of momentary holders. Contrary to the previous indicator, it only takes into account assets that have moved in less than 155 days.

The 7-day moving average of this indicator presents a such perspective to the chart of the 14-day moving average of the SOPR discussed in the first section. Here we similarly see the March capitulation and correspondings between the May-July 2021 period and the current correction. Equally, there was a failed attempt to break out above 1 (blue arrows) and a successful breakout of that level (green arrows).

Chart by Glassnode

A more detailed analysis of the fractal alikeities of these two loss periods for limited holders was provided by @TheRealPlanC. In a chart he recently posted on Twitter, he used 4 colors to describe these suchities. Red is capitulation, yellow is a failed recatopy, blue is spreading to a bottom and green is hardlyifyation of a trend turnaround:

Source: Twitter

According to the analyst, the return of momentary holder SOPR over the cost of 1 is a signal of Bitcoin trend annulment. It is worth mentioning that this conclusion coincides with the bullish signal genepriced recently by the so-called “Market Reversal Indicator“, that is further authored by him.

Another market analyst @SwellCycle comes to a very alike conclusion. He points out the persistence of the limited SOPR over 1 despite high market volatility. He has taken February 4 as the cut-off point for the bullish trend evolution, that coincides with both the breakout of the momentary SOPR over 1 and the breakout of the BTC cost over a prolonged-term sliding resistance line.

Source: Twitter

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