LEARN SPENT OUTPUT PROFIT RATIO (SOPR) INDEX IN 3 MINUTES——BLOCKCHAIN 101

Hello everyone! The SuperEx Academy’s exclusive course series on crypto-specific indicators continues. Today marks our 7th session in this dedicated series. If any of you would like us to cover a specific indicator, feel free to leave a comment at the bottom of the article.

Back to our topic—today we’re going to learn about a technical indicator called the “Spent Output Profit Ratio,” or SOPR for short. Throughout this session, we’ll refer to it as the SOPR indicator. SOPR is a powerful tool that helps you understand the profitability status of Bitcoin and other crypto assets. Whether you’re a newcomer to the blockchain space or a seasoned player aiming to better monitor market movements, this article has something valuable for you.

What is SOPR?

SOPR (Spent Output Profit Ratio) is a metric used to measure the profit or loss status of on-chain assets. The calculation is straightforward:

When a coin is transferred out of an address, the system records the price of that “spent output.”
The SOPR is the ratio of that output price to the coin’s acquisition cost at the time it was held.

If the ratio is greater than 1, it indicates that, overall, the coins were spent at a profit.
If the ratio is less than 1, it suggests the majority of assets were moved at a loss.

SOPR gives us two key insights:

Market sentiment: The distribution of profits and losses reflects investors’ risk appetite and selling pressure.
Momentum signals: When SOPR rises from below 1 to above 1, it often indicates the end of selling pressure and the beginning of a new upward cycle. Conversely, if it stays high for a prolonged period, it signals profit-taking and possible short-term corrections.

How SOPR works and how it’s calculated

The SOPR formula is roughly:
SOPR = (Total value of all spent outputs) / (Total cost basis of all spent outputs)
If SOPR > 1: It means coins moving out of wallets were sold at a profit. Most holders are realizing gains, and the market may face short-term selling pressure.
If SOPR < 1: It means the majority of coins are being sold at a loss, possibly due to stop-losses or liquidation. For long-term investors, this could be a “buy-the-dip” signal.

This simple and clear logic makes SOPR a valuable tool for tracking on-chain data and identifying market turning points. Whether you’re watching for profit-taking at bull market peaks or rebound opportunities at bear market bottoms, SOPR can guide your decisions.

How to use SOPR in actual trading

Spotting market turning points
When SOPR gradually rises from below 1 to around or above 1, it may signal that long-term losers are ceasing to sell, easing market pressure and indicating a potential rebound. Conversely, if SOPR remains above 1 for an extended period, heavy profit-taking may precede a correction.
Assessing investor sentiment
SOPR is not just a technical number—it’s a mirror reflecting investor psychology and behavioral patterns. When combined with other on-chain metrics (such as holder activity or unrealized profit ratios), you can form a more complete picture of market sentiment and make more informed investment decisions.
Building trading strategies
Use SOPR alongside other market indicators (e.g., volume, volatility, order book depth) to develop a comprehensive trading strategy. For instance, if SOPR bounces sharply from low levels while trading volume spikes, it may be a good time to scale in or buy the dip. Conversely, if SOPR hovers at high levels with rising volume, short-term traders should consider taking profits.

Advantages of using SOPR

Intuitive and simple: SOPR’s calculation and interpretation are straightforward and easy to grasp without the need for complex modeling.
Transparent on-chain data: All data is sourced from publicly available blockchain records, ensuring authenticity and immutability.
Captures market psychology: By focusing on profits and losses, SOPR reflects investor sentiment, offering practical insights for real-world trading.

Limitations of SOPR

Data lag: Due to the update cycle of on-chain data, SOPR signals may lag in extreme market conditions.
Single indicator risk: No single indicator can capture the full picture. Over-relying on SOPR may lead to missed external events, macroeconomic factors, or technical trends. Therefore, it’s recommended to combine SOPR with other tools to build a more robust risk management framework.

Conclusion

In today’s fast-changing crypto market, the ability to quickly and effectively capture market signals often determines whether you profit or get swallowed by volatility. As a clear and efficient on-chain tool, SOPR not only reveals real-time asset profitability but also provides valuable insight for predicting market turning points.

Through this BLOCKCHAIN 101 tutorial, we hope you can quickly grasp the basics of SOPR in under 3 minutes and understand how to apply it in real-world trading. Whether you’re a long-term holder or a short-term trader, using SOPR wisely can help you better interpret market dynamics, refine your trading strategies, and enhance the precision of your decisions.

Remember, technical indicators are just tools—how you effectively integrate market information and manage risks is the real key to gaining an edge in this capital game. Let’s continue exploring the blockchain world, using data and intelligence to uncover new investment opportunities!