The Best On-Chain Metric For Short-Term Bitcoin Trading

SOPR stands for Spent Output Profit Ratio. What does it mean? Simply put, it measures the profit or loss of each transaction (price sold/price paid). When SOPR is greater than 1 it means that transaction was in profit, and vice versa.

For example, person A buys Bitcoin at $10,000 and sells at $20,000, giving that transaction a SOPR of 2. Nice investment!

aSOPR is adjusted SOPR and all it does is remove transactions that aren’t the sale or purchase of Bitcoin. The idea is to remove unwanted noise from the metric.

Why is aSOPR valuable?

Before we get into the chart, we must reference Daniel Kahneman work which won a Nobel Prize in 2002. Essentially, his conclusions were that people are much more comfortable to sell in a profit. This theory aligns perfectly with the aSOPR metric.

aSOPR by Glassnode
aSOPR by Glassnode

Let’s examine the chart above. So we know that 1 (the black line) represents the break even point of transactions profit/loss. Each light blue line represents a new market cycle and each bubble represents whether it was bull (green) and bear (red).

During each bull market the aSOPR metric bounces off the 1 using it as support. There are periods of price instability like March 2020 but for the most this is accurate. During bull markets the 1 acts as support because when the aSOPR pulls back to the 1 area investors don’t sell anymore because they don’t want to sell in a loss. This in turn drives the supply down because investors are choosing to hold and wait which then causes upward pressure on price and the bull market resumes.

In bear markets, when aSOPR moves below the 1 investors mindset shifts too wanting to break even. Therefore, when aSOPR moves upward to the 1 area investors sell to break even. This causes extra supply which then forces the price down again resuming the bear market.

During both bull and bear markets, aSOPR is constantly flirting with the 1 area.

Currently, we can see it slightly below the black line which tells us we should see some upward movement in price if this bull market is still going.

aSOPR by Glassnode

Definitely something to watch out for. Shoutout to Renato Shira for his explanation on SOPR.