One of the advantages of Bitcoin is that there is a large amount of data available for analysis. The blockchain itself can provide a lot of information about the flow of funds, from which we can infer the mood and behavior of many investors. In this analysis, we will use blockchain data to introduce a new oscillator to describe two important psychological turning points that significantly change the bitcoin supply. This is the output profit margin (SOPR) that has been spent .
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SOPR (Spent Output Profit Ratio) is a very simple indicator. It is calculated based on the output that has been spent. It is the realized value of the realized value divided by the output. Or simply say: the price of the sale / the price of the purchase .
When SOPR > 1, it means that the owners who have spent the output are profitable at the time of the transaction; otherwise, they will lose money when they sell.
The following chart can be generated by plotting the SOPR of all spent outputs and summing the dates they spend (using the blockchain date).
The yellow line is the SOPR and the light blue line is the price.
You can get some interesting observations from the chart above. First, the SOPR seems to fluctuate around the number 1. Second, the value of SOPR below 1 during the bull market was discarded, and the value of SOPR higher than 1 during the bear market was discarded. Therefore, SOPR can be used as a reliable indicator for identifying the top and bottom of local prices (ignoring red areas, SOPR is unstable).
The yellow line is the SOPR and the light blue line is the price.
So how do you look at this indicator?
In general, people are more willing to sell when they are profitable. In a bull market, when the SOPR is below 1, people sell at a loss and are therefore reluctant to do so. This has significantly reduced the supply of circulation, which has put upward pressure on prices and prices have risen.
Bull market
In a bear market, everyone is selling or waiting for a break-even point to sell. When the SOPR is close to/greater than 1, people start to sell until the breakeven. As the supply of circulation increased, prices plummeted.
Bear market
Due to the fundamental nature of the underlying indicators on which SOPR relies, it can be reasonably assumed that SPPR is affecting price changes. It can be said that this indicator is very important, because most of the indicators are lagging indicators.
Some interesting things:
· SOPR indicates that the bull market is starting.
· SOPR also shows that technically, the bear market in 2018 is very painful; even when compared to 2015.
