Bitcoin On-Chain Analysis Basic Concepts - SOPR

SOPR（Spent Output Profit Ratio）is one of the most commonly used Bitcoin profit/loss indicators in on-chain analysis, suitable as the first tool for fans getting started with on-chain analysis.

What is SOPR?

SOPR evaluates the overall profit ratio of market participants by comparing the value of a UTXO（Unspent Transaction Output）at the time it is spent versus when it was created. In simple terms, it can be used to estimate whether the "moved Bitcoin" in the current market is being sold in a profitable or loss-making state.

The calculation is straightforward: SOPR = USD value at the time of spending (realized value) ÷ USD value at the time of creation (cost basis), which is "current value ÷ past value".

How to Interpret This Indicator's Value?

When SOPR is greater than 1, it means that on average, coins moved during this time frame are being sold at a profit; SOPR exactly equal to 1 indicates break-even on average; SOPR less than 1 means coins are on average being sold at a loss.

This is the most basic and easiest part to explain to fans: SOPR > 1 = market is realizing profits, SOPR < 1

market is selling at a loss.

Trends Are More Meaningful Than Single Values

When SOPR rises, it indicates profits are being realized, coins that were in profit are being transferred to others, which may also mean profit-taking selling pressure is increasing, or overall market conditions for sellers are becoming more favorable; when SOPR falls, it indicates losses are being realized, possibly reflecting increased loss-cutting selling pressure and worsening conditions for sellers.

Practical Applications in Bull and Bear Markets

• Bull market: As prices rise, more holdings turn profitable, and long-term holders tend to take profits when opportunities arise. If SOPR approaches or falls below 1 after a correction, it indicates that profit-taking holders' coins are in "dormancy," which may be an entry signal; if SOPR continues to rise, it may indicate increasing profit-taking selling pressure, or even suggest approaching a local or macro top.
• Bull market pullback: Newcomers may panic sell, while long-term holders may add to positions during the dip; if profitable coins continue flowing into the market, SOPR will gradually decline; if newcomers engage in capitulation selling, SOPR may approach or drop below 1, while profitable coins remain dormant, reflecting market confidence and subsequent rebound potential.
• Bear market: When supply continues to exceed demand, SOPR may appear elevated. At local lows, investors cutting losses will push SOPR significantly below 1, creating entry opportunities for contrarian traders. During the reversal and recovery phase, SOPR may rise back above 1. If the bear market enters a final capitulation stage, SOPR may remain below 1, indicating that remaining profitable coins continue to stay dormant, setting the stage for a subsequent supply squeeze.

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Simple Analogy for Newbie Readers

SOPR is like the average profit and loss statement for the entire Bitcoin market: every moved Bitcoin tells you whether that coin was sold at a profit or at a loss. A single day's number has little meaning; the focus is on long-term trends and the critical moments when it breaks below or rises above 1, which usually correspond to turning points in market sentiment.