Module 6: On-Chain Analysis
Cost Basis and Profit and Loss Metrics
Chapter 6 of 12 · about 6 minutes
6.1 Is everyone winning or losing?
"Here's a question you can't answer in the stock market," said Hash. "Right now, how many Bitcoin holders are sitting on a profit, and how big is it?"
Mint guessed. "No idea. How could anyone know?"
"Because the blockchain records the price when each coin last moved," said Hash. "Add it up, and you can estimate the market's total cost basis. That turns out to be one of the most useful pieces of information in crypto."
6.2 Realized cap and realized price
Normal market cap values every coin at today's price (Module 1, Chapter 10). Realized cap values each coin at the price when it last moved on-chain, roughly approximating what holders paid.
Realized price is realized cap divided by circulating supply: an estimate of the average cost basis across the whole market.
Here's a tiny illustrative network with three coins:
| Coin | Price when last moved | Value at that price |
|---|---|---|
| Coin A | $20,000 | $20,000 |
| Coin B | $60,000 | $60,000 |
| Coin C | $100,000 | $100,000 |
| Realized cap | $180,000 | |
| Realized price | $180,000 ÷ 3 | $60,000 |
If today's price is $90,000:
| Value | |
|---|---|
| Market cap | 3 × $90,000 = $270,000 |
| Realized cap | $180,000 |
| Coins in profit | A and B (2 of 3) |
| Coins at a loss | C (1 of 3) |
"So on average, holders bought at $60,000, and today's price is $90,000," said Mint. "The market as a whole is up 50%."
"Roughly, yes," said Hash. "It's an approximation. It uses the last time coins moved, which isn't always when the current holder bought them. And lost coins count at their old prices forever. But it's a powerful approximation."
6.3 Realized price as support
Realized price has historically acted as an important level. When the market price falls below realized price, the average holder is at a loss. This has tended to happen only in deep bear markets, and periods below realized price have often been good long-term buying opportunities in Bitcoin's history.
Analysts also calculate realized prices for specific cohorts. The short-term holder realized price is the average cost basis of recent buyers (Chapter 5). In bull markets, it often acts as support during pullbacks, as recent buyers defend their break-even. When price falls below it, recent buyers are underwater, which can trigger panic selling.
6.4 MVRV
MVRV stands for market value to realized value: market cap divided by realized cap.
MVRV = market cap ÷ realized cap
In the example: $270,000 ÷ $180,000 = 1.5. The market is valued 50% above its aggregate cost basis.
| MVRV | Meaning |
|---|---|
| Below 1 | Market value below aggregate cost basis; holders on average at a loss |
| Around 1 to 2 | Moderate profits |
| Much higher | Large unrealised profits; historically associated with overheated markets |
In Bitcoin's history, high readings have coincided with major cycle tops, and readings below 1 with major bottoms. But the level that marks a top keeps falling: early cycles peaked near 5 to 6, while the October 2025 top printed around 2.3, below the old "above 3" rule of thumb. These are historical observations, not rules, and there's no fixed threshold that reliably marks a top.
Chapter 6 · Realised cap and MVRV
Market cap values every coin at today's price, while realised cap values each coin at the price it last moved on-chain. Their ratio, MVRV, sits below one in deep bear markets, between one and two in normal conditions, and well above two near historical tops.
6.5 Supply in profit
Percent supply in profit measures the share of coins whose current price is above the price when they last moved. In the example, 2 of 3 coins, or about 67%, are in profit.
When nearly all supply is in profit, everyone who bought is winning, and many may be tempted to sell. When a large share is in loss, selling pressure from profit-takers is low, but fear can be high.
6.6 NUPL
Net unrealized profit and loss (NUPL) expresses the market's overall unrealised profit as a share of market cap.
NUPL = (market cap − realized cap) ÷ market cap
In the example: ($270,000 − $180,000) ÷ $270,000 = 0.33, or 33%.
| NUPL range | Common label |
|---|---|
| Below 0 | Capitulation |
| 0 to 0.25 | Hope and fear |
| 0.25 to 0.5 | Optimism and anxiety |
| 0.5 to 0.75 | Belief and denial |
| Above 0.75 | Euphoria and greed |
These labels are popular descriptions of market psychology. The bands are conventions, not precise thresholds.
6.7 SOPR
MVRV and NUPL look at unrealised profit: what holders would make if they sold. SOPR, the spent output profit ratio, looks at realised profit: what people actually made when they moved coins.
SOPR = value of coins when spent ÷ value of those coins when they were acquired
| Coins spent today | Bought at | Sold at | SOPR |
|---|---|---|---|
| Example 1 | $60,000 | $90,000 | 1.5 (sold at a profit) |
| Example 2 | $100,000 | $90,000 | 0.9 (sold at a loss) |
The aggregate SOPR combines all coins spent in a period.
| SOPR | Meaning |
|---|---|
| Above 1 | On average, coins moved today are being sold at a profit |
| Equal to 1 | Break-even |
| Below 1 | On average, coins are being sold at a loss |
In bull markets, SOPR often dips toward 1 during pullbacks and then bounces, as holders refuse to sell at break-even. In bear markets, SOPR often rises toward 1 and then falls, as holders sell as soon as they break even. When SOPR drops sharply below 1, it can indicate capitulation: people selling at a loss in fear.
6.8 Limits of these metrics
Node raised the key concerns. "These all depend on knowing what people paid. But the blockchain only knows when coins moved."
"Right," said Hash. "Here are the main limits."
| Limitation | Effect |
|---|---|
| Last movement isn't always purchase | Internal transfers reset a coin's cost basis to the current price, without any purchase |
| Exchange activity is invisible | Coins bought and sold within an exchange don't show new cost bases |
| ETF and custodial holdings | Coins held in custody for many investors appear as single entities |
| Lost coins | Counted at very old prices, lowering realized price |
| Account-based chains | Cost basis is harder to estimate for Ethereum and similar chains |
| Changing market structure | Historical thresholds may not apply to future cycles |
Analytics platforms try to correct for some of these, for example by filtering out transfers between addresses of the same entity. But the metrics remain approximations.
6.9 Try it yourself
Find charts of Bitcoin's realized price, MVRV, and SOPR. Note today's values. Then look at the last two major market tops and bottoms. What were MVRV and NUPL at each? Did SOPR behave as described in section 6.7 during the last bull market's pullbacks?
Finally, find the short-term holder realized price and check whether price has respected it recently.
Key takeaways from this chapter
- Realized cap values each coin at the price it last moved; realized price estimates the market's average cost basis.
- Price falling below realized price has historically occurred only in deep bear markets.
- The short-term holder realized price often acts as support in bull markets.
- MVRV compares market cap with realized cap; very high readings have coincided with tops, below 1 with bottoms.
- NUPL expresses unrealised profit as a share of market cap and maps to common psychology labels.
- SOPR measures realised profit when coins are spent; behaviour around 1 reveals market sentiment.
- These metrics are approximations, affected by internal transfers, exchanges, custody, lost coins, and changing market structure.