Bitcoin on-chain: SOPR points to capitulation of long-term hodlers, bottom in sight?

Last Updated: 5 July 2022

The special thing about bitcoin as a financial asset is that the blockchain makes it possible to analyse a lot of activity within the ecosystem. On-chain data now tells us that the “long-term” hodlers, people who hold their bitcoin for 155 days or more, are slowly capitulating but that the bottom has not yet been reached.

Long-term hodlers are selling at a loss

The Spent Output Profit Ratio or SOPR is an indicator that tells us whether bitcoiners are currently selling at a profit or loss. This statistic checks the on-chain history of every bitcoin that changes address and compares the last exchange rate with the penultimate exchange rate.

If the penultimate exchange rate of the bitcoin in question is higher than the current exchange rate, then this bitcoin has been sold at a loss. Conversely, of course, we speak of a profit. An SOPR score above 1 indicates that the market, on average, is selling at a profit and vice versa.

The chart above shows the 14-day moving average of the SOPR score of long-term hodlers. At the time of writing, we are dangling just above the green line, which has been pretty accurate in predicting the bottom over the years.

Bitcoin usually reached macro-bottoms during previous bear markets when the SOPR score was around 0.48. At the time of writing, the indicator is giving a score of around 0.62. So, as far as the SOPR is concerned, we are heading towards a bottom, but unfortunately, we are not there yet.

The bitcoin price

At the time of writing, bitcoin is trading above $20,000 again, after making a nice spurt upwards during the night from Monday to Tuesday. How far we manage to hold on to the magical $20,000 mark this time remains to be seen. Macro-technically speaking, not much has changed in recent days, and the outlook for the coming months is not good.

The whole market is waiting for the Federal Reserve to blink and admit that the current economy can no longer cope with continuous interest rate increases. The pity for us is that the Federal Reserve seems to have considerable room for manoeuvre with US unemployment at 3.6 percent historic low.

However, it seems an impossible mission to bring inflation, currently at 8.6 percent, down to 2 percent without setting the entire job market ablaze in the process. Fortunately, we do not have to worry about that, and that is the Federal Reserve’s problem, which they have partly caused with their own policies in recent years.

  • Ivan Brightly

    Ivan Brightly is a leading cryptocurrency analyst and author with over 5 years of experience in the blockchain and digital asset space. He previously served as a senior analyst at a major cryptocurrency hedge fund where he led quantitative research and trading strategy development.

    Ivan holds a Master's degree in Finance from the London School of Economics and a Bachelor's in Computer Science from Stanford University. He is frequently invited to speak at fintech and blockchain conferences worldwide on topics spanning cryptocurrency trading, blockchain technology, and the future of digital assets.

    Ivan's commentary has been featured in several major finance and technology publications including Forbes, Bloomberg, and CoinDesk. He is considered one of the most insightful voices analyzing new developments in the cryptocurrency and blockchain industry.

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