Measuring profit and loss on the blockchain
The Spent Output Profit Ratio (SOPR) measures whether coins moving on-chain are doing so at a profit or loss relative to their acquisition price. When a coin is spent (moved), its acquisition price is recorded on-chain. Comparing this to the price at the time of movement yields a profit or loss. SOPR aggregates this across all transactions: values above 1 indicate coins are being sold at a profit, below 1 means at a loss.
Reading capitulation and greed from SOPR
During bull runs, SOPR remains above 1 as holders book gains. During bear markets, SOPR drops below 1, indicating distressed selling. Extreme low SOPR readings (below 0.8) signal capitulation, where holders are liquidating at significant losses. These periods often mark market bottoms because panic selling at losses is unsustainable. SOPR readings above 1.5 can indicate euphoria, a level at which profit-taking becomes likely.