On-Chain Fundamentals for Humans | Part 3

Adler Education Issue #11

SOPR: Profit/Loss as a Regime Switch

SERIES CONTEXT

Series: “On-Chain Fundamentals for Humans”
Part: 3 of 9

Series Roadmap:

• Part 1: On-chain 101 - fundamentals of blockchain measurement. What are UTXOs, realized cap, cohorts, and why this data is relevant for understanding the market

• Part 2: Realized Price - how to read realized price (aggregate and by cohort) as support/resistance

• Part 3 (current): SOPR - profit/loss as a regime switch. SOPR vs aSOPR, how to interpret “flushes” and “re-accumulation”

• Part 4: STH vs LTH cost basis - who is currently underwater

• Part 5: MVRV - overheating/undervaluation without guessing

• Part 6: NUPL - sentiment through network profitability

• Part 7: Supply dynamics - who holds the supply

• Part 8: Flows - exchange inflow/outflow without myths

• Part 9: How to combine signals

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1. CONNECTION TO PREVIOUS PARTS

Methodological Note:

This lesson uses CryptoQuant data for SOPR, aSOPR, STH-SOPR, LTH-SOPR. All price values are given as daily close unless otherwise specified.

In the first two parts, we built a foundation of understanding:

Part 1 gave us the language - UTXOs, Realized Cap, cohorts. We learned that each coin has a history: when it was created, at what price, how long it hasn’t moved.

Part 2 transformed the abstract Realized Cap into concrete price levels - Realized Price. We learned to determine market regimes through the relationship between price and cost basis of different cohorts:

• 🟢 Healthy regime: Price > STH RP > LTH RP

• 🟡 Stress zone: STH RP > Price > LTH RP

• 🔴 Capitulation: Price < LTH RP

Realized Price shows WHERE the important levels are. But it doesn’t answer the question: WHAT happens when people sell at these levels?

This is where SOPR comes in.

Key Insight Linking Part 2 → Part 3:

Realized Price is a static map (where the levels are). SOPR is a dynamic indicator (what’s happening right now).

When price touches STH RP (Part 2), SOPR will show how participants react:

• Realizing losses (SOPR < 1) → capitulation, potential bottom

• Taking profits (SOPR > 1) → healthy profit-taking or beginning of distribution

What You’ll Get After This Lesson:

• Understanding of SOPR mechanics: what exactly it measures and why it works

• Skill to distinguish SOPR and aSOPR - when to use which

• Interpretation of “flushes” (SOPR < 1) and “re-accumulation”

• Practical framework for determining market regime through profit/loss

• Combination of SOPR with Realized Price for the complete picture

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2. SOPR BASICS

2.1 Formula and Intuition

SOPR (Spent Output Profit Ratio) measures the profit or loss of coins at the moment of their movement.