BTC Losses Become Real as Bitcoin SOPR Hits Lowest Since March 2020

BTC Losses Become Real as Bitcoin SOPR Hits Lowest Since March 2020

Bitcoin (BTC) sellers are suffering their biggest total loss since March 2020, one online metric shows.

Data from on-chain analytics firm Glassnode confirms that the bitcoin production profit margin (SOPR) has now fallen to a two-year low.

BTC losses on the network are on the rise

As bitcoin holders attempt to withdraw funds from exchanges to non-custodial wallets, those who move coins do so with years of high losses.

SOPR divides the realized value of coins in a spent issue by their value at creation. In other words, as Glassnode summarizes, “price sold/price paid.”

As reported by Cointelegraph, 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 during the bear market phase, resulting in relatively large total realized losses after the sale of coins.

Thus, the end of a bear market tends to result in a lower SOPR. As of November 14, the seven-day moving average of the index was 0.9847, the lowest since the COVID-19 intermarket crash in March 2020.

Graph of the ratio of profits spent to bitcoin output (SOPR). Source: glassnode

SOPR has additional implications for BTC price action.

If BTC/USD starts to rise, hodlers will have an incentive to sell at cost or slightly higher to avoid losses. This leads to an oversupply, which, without buyers, logically causes the price to drop again.

As such, SOPR acts as a useful predictive tool for potential price trends, and 1 is once again an important line in the sand when it comes to hodlers reaching out to sellers.

“Because of the fundamental nature of the underlying metrics that SOPR relies on, it would be fair to assume that the input-to-profit ratio influences price changes,” said Renatio Chirakashi, creator of the metric, in his 2019 introduction:

“This could make a big difference as most of the current indicators are lagging.”

In March 2020, SOPR briefly dropped to 0.9486, which is still not as low as it was at the end of the 2018 bear market, when it hit 0.9416.

Graph of the ratio of profits spent to bitcoin output (SOPR). Source: glassnode

4 million wallets now hold at least 0.1 BTC

Meanwhile, those who engage in “buying the fall” do so even on the smallest level.

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Further data from Glassnode shows that the number of wallets holding at least 0.1 BTC, or around $1,700 at the time of writing, has topped 4 million.

Despite a near-constant rise this year, the trend has picked up noticeably as BTC/USD fell due to the FTX scandal.

Bitcoin addresses with a chart of 0.1 BTC or more. Source: glassnode

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