What Does the SOPR Metric Tell Us?

According to the data, the SOPR rate was above 1 recently. SOPR shows whether investors in the Bitcoin market are currently selling their money at a profit or loss. When the value of this metric is above 1, it means that average owners in the industry are currently moving their money at a loss. On the other hand, values below this threshold indicate that the market is currently making a net profit.

The BTC industry is generally divided into two main groups of owners: “short-term investors” (STHs) and “long-term investors” (LTHs). The first group includes all investors who have received their money in the last 155 days, while the second group includes those who bought before this segment. In the context of the present discussion, the relevant indicator is the “SOPR ratio”, not the SOPR itself. This indicator specifically measures the ratio between SOPR for LTHs and STHs.

As you can see in the chart above, the 30-day SMA Bitcoin SOPR rate that the cryptocurrency has followed in its past cycles is marked. When the SOPR ratio is below 1, long-term investors (LTHs) earn lower profits than short-term investors (STHs). Historically, this has often been observed in bear markets. Bear market bottom formations in the asset price have always occurred when the indicator drops deep below this mark and sees around 0.5.

Bull periods followed when the metric rose above the 1 level again. Such a breakout implies that long-term investors are making higher profits during such periods than short-term investors and indicates a shift in market dynamics. During the rally over the past few months, the 30-day SMA Bitcoin SOPR rate has managed to rise above 1 again, suggesting that a move towards a bull market may have occurred.

The metric stands well above this level, despite the recent woes that BTC has been through. The analyst thinks this is a sign that the bulls are still dominating the market. The chart also shows that current values for the SOPR ratio are not as high as levels observed during past rallies, including the April 2019 rally, suggesting that the rally may have potential before it peaks.