LTH-SOPR
Long-Term Holder SOPR (LTH-SOPR) is a variant of SOPR that takes into account only spent outputs older than 155 days. As such, LTH-SOPR serves as an indicator for assessing the behaviour and profitability of smart-money investors who have greater fundamental understanding of the asset and more experience in market volatility.
Statistically, UTXOs older than 155 days are less likely to be spent, and as such are generally considered to be part of the illiquid circulating supply. LTH-SOPR filters for only these 'old coins' to estimate the amount of profit or loss that is realised by this cohort. This provides insight into the behaviour and sentiment of experienced and smart-money investors who are less likely to react to market volatility, and have higher fundamental conviction to hold the asset.
Over the course of 155-days (LTH threshold), it is common for market volatility and price to resolve in a direction, either above, or below the price when the UTXO was created (assumed cost basis). As a result, when a coin held by a LTH is spent, it tends to realise a sizeable profit or loss. Unlike the standard SOPR metric and variants (aSOPR and STH-SOPR), which typically oscillate around a value of 1.0, the LTH-SOPR often reaches relatively large (> 2.0) and small values (<0.8).
As such, LTH-SOPR tends to act a longer term macro cycle oscillator, with indicator values representing the aggregate profit/loss multiple realised by Long-Term Holders.
LTH-SOPR is calculated by taking the SOPR value only for spent outputs as old as or older than 155 days.
A common assumption when performing analysis on spending patterns is to categorise coin holders using the following framework:
Short-Term Holders (coin lifespan < 155-days) are more likely to be new and/or inexperienced market entrants, particularly in bull markets. This cohort are more likely to react to short-term market volatility and re-spend their coins as the marginal buyer/seller.
Long-Term Holders (coin lifespan > 155-days) are more likely to be smart money investors who accumulate cheap coins in the bear and/or early bull cycle, and distribute expensive coins late in the bull cycle. This cohort is less sensitive to market volatility, particularly when coins held are at an unrealised gain.
Given Bitcoin's historically exponential price performance in bull markets, and significant draw-downs in bear markets, Long-Term Holders tend to realise relatively large profits or losses when spending their coins. The spending of 'old coins' may indicate both a change in sentiment and conviction within the smart-money cohort, and also a potential release of illiquid coins back into liquid circulation.
As price rises or falls significantly from an investors cost basis, the incentive to spend increases. For Long-Term Holders, market extremes can be considered within the following framework:
High LTH-SOPR Values indicate that on aggregate, LTHs are realising high profit multiples on spent coins. A LTH-SOPR value of 4.0 can generally be interpreted as LTHs realising an aggregate average profit of 300% (4.0 - 1.0 = 3.0) that day.
Low LTH-SOPR Values indicate that on aggregate, LTHs are realising losses on spent coins, which is typical only in bear markets. A LTH-SOPR value of 0.6 can be interpreted as LTHs realising an aggregate loss of 40% (0.6 - 1.0 = -0.4) that day.
LTH-SOPR can provide macro cyclical top and bottom signals as demonstrated in the chart below. Macro tops have historically been reached when LTH-SOPR values >10 are achieved, indicating profits of 900%+ are being realised by LTHs. Macro bottoms have historically been established where LTHs are realising significant losses with LTH-SOPR reaching 0.6 and below (losses of 40% or more).
Glassnode (March 2020)
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