BTC SOPR Momentum: Onchain

The BTC SOPR Momentum: Onchain indicator tracks the Spent Output Profit Ratio (SOPR) momentum to identify market trends and potential reversal points in Bitcoin's price action.

Usage

The BTC SOPR Momentum: Onchain tool is designed primarily for higher timeframes, such as daily or weekly charts, to filter out short-term noise and focus on broader market cycles.

• Trend Bias: When the indicator resides above the central gray support/resistance zone (levels 45-55), it indicates an uptrend and a bullish bias. Conversely, when it stays below this zone, it suggests a downtrend and a bearish bias.
• Signal Generation: A cross above the gray level serves as a potential long signal, while a cross below the gray level serves as a potential short signal.
• Overbought/Oversold (Extreme Areas): When the indicator enters and subsequently exits the upper extreme area (above 78), it often coincides with the formation of a local or cycle top. Entering and leaving the lower extreme area (below 22) often indicates the formation of a local or cycle bottom.

Details

This script is built upon the Spent Output Profit Ratio (SOPR) metric, originally conceptualized by Renato Shirakashi. SOPR is calculated by dividing the realized value of a spent output by its value at creation (price sold / price paid).

• SOPR > 1: Owners of spent outputs are, on average, in profit at the time of transaction.
• SOPR < 1: Owners of spent outputs are, on average, at a loss.

This specific implementation applies momentum oscillators (SMA and RSI) to the raw SOPR data. By smoothing the SOPR with a 14-period moving average and then processing it through a Relative Strength Index (RSI), the indicator transforms on-chain profitability data into a bounded oscillator that highlights shifts in market sentiment and momentum.

Settings

• Symbol: Defines the source symbol for SOPR data (default is "BTC_SOPR").

FAQ

How do I interpret the gray zone in the middle?

The gray zone (levels 45 to 55) acts as a pivot area. If the momentum line is consistently above this range, the market is considered to be in a position of strength; below it suggests weakness.

Which timeframes are best for this indicator?

Due to the nature of on-chain data, this indicator is most effective on Daily (D) and Weekly (W) timeframes.

How can I get access to BTC SOPR Momentum: Onchain?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.