1) Coming back to BTC, we at Hayfeng saw some comments from fans in yesterday’s video, saying that adding one million to the position is a bit too much, so let’s give everyone a boost of faith and how we make good use of Bitcoin’s Swiss Army Knife - SOPR to add 1 million US dollars?

In this video, I will introduce one of the most powerful and useful on-chain indicators in our tool belt, the SOPR indicator series.

First of all, SOPR is a sister indicator of MVRV, and the two have similar characteristics.

MVRV describes the average unrealized profit held by investors. MVRV can be considered as a paper gain for Bitcoin holders, which incentivizes them to sell.

SOPR describes the average realized profit locked in by investors. Think of SOPR as a measure of the gain or loss locked in by Bitcoin holders who take chips off the table.

The chart below shows both metrics on the same axis. MVRV tends to have much larger amplitudes because it includes relatively large swings in gains and losses by HODLers who bought in a bear market and held on to a bull market.

SOPR fluctuates much less than MVRV because the vast majority of coins traded daily have been recently purchased. As a result, most tokens typically trade within only around ±10% of the original purchase price.

2) SOPR’s core use cases

SOPR is an all-weather indicator that can be used in both bull and bear markets. We can use it to find local and global tops, as well as local and global bottoms.

The chart shows two trajectories;

We can see that the SOPR is very noisy, with many spikes in both directions.

SOPR with a 7-day EMA applied, which is my preferred style of analysis.

A very high SOPR value means that investors with large paper profits are starting to profit from the market.

These are savvy investors who are selling tokens to new (and often inexperienced) speculators.

An extremely low SOPR value means that investors who bought at the top and held on throughout the bear market finally capitulated.

Seller exhaustion tends to occur near the absolute bottom of the cycle.

The 7-day EMA both removes daily noise and puts more emphasis on recent history, which helps refine signals and identify trends. We also see that the SOPR for long-term holders is currently just a little above the 1 value. , there is still a lot of space above, and we intend to get the 1.2 interval value position.

3) Ok, we did it. Now we are going to dive into my favorite and most used indicator: Short-Term Holder SOPR (STH-SOPR).

I use this indicator for analysis every day. There is no other indicator that can compare with it. It is definitely a bargain-hunting tool;

First, why short-term holders? This group represents the "hot money" that has bought tokens in the past 5 months. They are price sensitive, and their spending is the best indicator of shifts in sentiment and investor behavior in the short term.

Broadly speaking, there are four key phases in the STH-SOPR market cycle:

Crash buying warning: huge profits suddenly turn into huge losses as the first big sell-off kills the bull market (most people are still complacent and think it will come back).

Resistance: STH-SOPR consistently encounters resistance at 1.0, typically before the market sells off again. This eventually leads to a major capitulation event and very low SOPR readings.

Divergence: STH-SOPR starts to move back towards breakeven while price moves sideways or even down. Sellers are exhausted and I look for a bullish reversal with STH-SOPR finding support at 1.0.

Buy the Dip: STH-SOPR is holding consistently above 1.0 in a bullish uptrend and finding support after a brief, sharp break below 1.0. Everyone will be able to grasp it if they have time to look carefully;

4) Finally, I want to talk about the bottom V inverse behavior we call undercutting which occurs whenever STH-SOPR retests 1.0 from above or below.

What makes STH-SOPR so actionable is that it filters out all long-term HODLer behavior, so we only focus on investors who have been active in recent months.

As a contrarian investor, I want to wait for people to get a little scared and then be the one to get cheaper chips from the panic sellers.

The reality of the market is cruel, unfair, and most people lose money.

STH-SOPR can help us spot when less sophisticated buyers are buying at high prices and then capitulating at low prices.

If we are in a bull market and STH-SOPR falls below 1.0, there is a 70% chance that it will move higher.

This is why undercuts are so useful, because the deeper the undercut, the higher these probabilities are!