Understanding Bitcoin’s Spent Output Profit Ratio (SOPR)
The spent output profit ratio (SOPR) of Bitcoin is a key metric that helps investors understand the behavior of long-term holders (LTHs) compared to short-term holders (STHs). By dividing the SOPR of LTHs by the SOPR of STHs, we can determine whether LTHs are realizing more profits than STHs, which can provide insights into potential market trends.
Recent Spike in SOPR Ratio
Last week, the SOPR ratio experienced a significant spike, reaching a two-month high of 3.55 on March 22. Such sharp increases in the SOPR ratio often coincide with local market tops as LTHs capitalize on rising prices.
Interpreting the Decline in SOPR Ratio
The following day, the SOPR ratio saw a decline. This could indicate a decrease in profit-taking by LTHs or a surge in activity from STHs. The spike in Bitcoin’s price on March 23 further supports this observation.
It appears that LTHs were actively selling as prices rose, with a gradual increase in selling activity before a sudden acceleration. The subsequent drop in SOPR suggests a period of consolidation, where LTHs may have eased their selling pressure, allowing STHs to take over.
Future Implications of SOPR Trends
If the SOPR continues to decline, it may signal reduced activity from LTHs and a rise in selling pressure from STHs. Conversely, a sustained increase in SOPR could indicate further distribution by LTHs in the market.
