onchained2023-08-03

Analysis of the LTH-SOPR (Long Term Holder Spent Output Profit Ratio)

The LTH-SOPR (Long Term Holder Spent Output Profit Ratio) indicator is a tool that measures the profitability of Bitcoin transactions held over a period longer than 155 days. It is calculated by dividing the dollar value of Bitcoins sold (spent output value) by their dollar value at the time of their acquisition (creation value). This indicator focuses exclusively on long-term transactions, excluding movements of Bitcoins held for less than 155 days. If the LTH-SOPR value is greater than 1, it implies that, on average, Bitcoins held by long-term investors are sold at a profit. If it's exactly equal to 1, Bitcoins held by long-term investors are sold neither at a gain nor a loss. If it's less than 1, it signifies that Bitcoins held by long-term investors are sold at a loss. An increase in the LTH-SOPR value suggests that the conditions for long-term holding are becoming more profitable for long-term investors. Conversely, a decrease in this value indicates that these conditions are becoming less profitable. Looking at the trend on the chart below, the LTH-SOPR has decreased since its peak in June 2023, when Bitcoin moved from $25,800 to $31,000. This suggests that long-term investors are selling their Bitcoins under increasingly unfavorable conditions. This can be explained by the realization of losses by more or less skeptical long-term investors, who bought Bitcoin in 2021 at values higher than $30K. These investors are starting to sell their holdings at a loss in order to permanently exit the market or reposition themselves to buy at lower prices.