SOPR Score

The Spent Output Profit Ratio (SOPR) is an essential on-chain metric used to evaluate the profit or loss of coins when they are spent on the blockchain. This metric helps in understanding market sentiment by revealing whether investors are realizing profits or losses at the time of transaction. SOPR is particularly useful for identifying market tops, bottoms, and potential trend reversals.

Key Features:

1. Profit and Loss Measurement:

   • SOPR reflects whether the coins moved on-chain are being sold at a profit or a loss compared to their purchase price.

2. Market Sentiment Indicator:

   • High SOPR values suggest profit realization and potential overheated market conditions.

   • Low SOPR values indicate loss realization, which may signal market capitulation or bottoming.

3. Trend Reversal Detection:

   • Sustained changes in SOPR values can indicate shifts between bullish and bearish trends.

How SOPR Works:

SOPR is calculated using the following formula:

Where:

• Realized Value: The price at which the spent output was sold or transacted.

• Value at Creation: The price when the output was initially created.

Interpretation of SOPR Values:

• SOPR > 1: Investors are selling at a profit, indicating a bullish sentiment.

• SOPR < 1: Investors are selling at a loss, suggesting bearish sentiment or capitulation.

• SOPR = 1: Coins are being sold at break-even, often viewed as a market equilibrium point.

Usage Tips:

1. Monitor Trend Consistency:

   • When SOPR remains consistently above 1, it reflects a strong bullish trend.

   • Sustained below 1 values may signal a prolonged bearish phase.

2. Identify Market Reversals:

   • Rising SOPR after a period of decline can signal market recovery.

   • Falling SOPR after a bullish phase may suggest profit-taking and potential trend reversal.

3. Combine with Other Metrics:

   • Use SOPR alongside other on-chain metrics like Net Unrealized Profit/Loss (NUPL) for a comprehensive view of market dynamics.