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BTC: Bitcoin SOPR metric falls to lowest level since March 2020

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Since the last Bitcoin “black swan” event, the sale price and price paid have diverged the most in over two years.

One on-chain metric indicates that Bitcoin (BTC) sellers have suffered their largest overall losses since March 2020.

The on-chain analytics company Glassnode has confirmed that Bitcoin’s spent output profit ratio (SOPR) has reached its lowest level in two years.

As Bitcoin holders attempt to withdraw funds from exchanges into non-custodial wallets, those exchanging coins incur losses at multi-year highs.

SOPR divides coins’ actual value in a spent output by their initial value. In other words, “price sold / price paid,” as Glassnode explains.

According to Cointelegraph, SOPR fluctuates around one and tends to be below this level during Bitcoin bear markets and above this level during Bitcoin bull markets.

This makes sense, as unrealized losses increase during the bear market phase, resulting in relatively larger realized losses when coins are sold.

Consequently, the end of bear markets is typically accompanied by a decline in SOPR. The 7-day moving average of the metric was 0.9847 as of November 14 — its lowest level since the March 2020 COVID-19 cross-market crash.

SOPR has additional implications for Bitcoin’s price behavior.

Should the BTC/USD pair begin to rise, holders will be motivated to sell at cost or slightly above to avoid losses. This results in a surplus of supply, which logically causes the price to fall once more in the absence of buyers.

Thus, SOPR is a helpful tool for predicting future price trends, with one once again serving as the crucial dividing line between buyers and sellers.

“Due to the fundamental nature of the metrics on which the SOPR is based, it is reasonable to assume that the Spent Output Profit Ratio influences price changes,” the metric’s creator, Renatio Shirakashi, stated in his 2019 introduction.

This can be of great importance, given that most current indicators are lagging.

March 2020 saw a brief drop in SOPR to 0.9486, which was not as low as the end of the bear market in 2018 (0.9416).

Those “buying the dip” do so even on a minor scale.

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According to additional Glassnode data, the number of wallets holding at least 0.1 BTC ($1,700) has surpassed 4 million.

As a result of the FTX scandal, the BTC/USD exchange rate declined, causing the trend to accelerate significantly.