BTC losses become real as Bitcoin SOPR metric hits lowest since March 2020
Bitcoin (BTC) sellers are nursing their biggest combined losses since March 2020, an on-chain calculation suggests.
Data from chain analysis firm Glassnode confirms that Bitcoin’s used output profit ratio (SOPR) has now fallen to a two-year low.
BTC losses on the chain are increasing
While Bitcoin holders attempt to withdraw funds from exchanges into non-custodial wallets, those moving coins around do so at high losses over several years.
SOPR divides the realized value of coins in a used production by the value at creation. In other words, as Glassnode summarizes, “sold price / paid price.”
As Cointelegraph reported, the SOPR hovers around 1, and tends to be below that level during Bitcoin bear markets and above it in bull markets.
This is logical, as unrealized losses increase throughout the bear market phase, leading to relatively larger overall realized losses when coins are sold.
As such, the end of bear markets tend to see lower SOPR. As of November 14, the metric’s 7-day moving average was at 0.9847 – the lowest since the March 2020 COVID-19 crash.
SOPR has further implications for BTC price action.
Should BTC/USD start to gain, hodlers will have an incentive to sell at or slightly above cost to avoid losses. This leads to a supply glut, which, without buyers, logically forces the price down again.
SOPR thus acts as a useful forecasting tool for potential price trends, with 1 again being the important line in the sand when it comes to breeders approaching sellers.
“Due to the fundamental nature of underlying metrics that the SOPR relies on, it would be reasonable to speculate that the earnings used output ratio affects price changes,” said Renatio Shirakashi, the metric’s creator, in an introduction to it in 2019.
“This could be of significant importance, as most current indicators are lagging indicators.”
In March 2020, the SOPR briefly dipped to just 0.9486, still not as low as the end of the 2018 bear market, which produced a score of 0.9416.
4 million wallets now hold at least 0.1 BTC
Meanwhile, those engaged in “buying the dip” are doing so even at the smallest level.
Related: Elon Musk Says BTC ‘Will Make It’ – 5 Things to Know in Bitcoin This Week
Additional Glassnode data shows that the number of wallets containing at least 0.1 BTC ($1,700) has now passed 4 million.
While rising almost constantly this year, the trend saw a marked acceleration when BTC/USD fell due to the FTX scandal.
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