Soft butch is a lesbian female, who dresses like a butch (a very masculine woman) but still retains some feminine traits within herself and doesn’t suppress those, rather embraces them.
A soft butch is basically the one in the relationship, who can’t decide if she wants to be the man or the woman, so she retains a little bit of both.
She is the femme and the butch in the same person.
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To find the root of the term, we must find, where butch comes from.
The most probable explanation is that it is an abbreviation of the word butcher, because a butch basically looks like a dude, who managed to butcher his sausage, and became a woman.
Add the word soft, and you signal, that we are no longer talking about the common butch, but something softer and more feminine.
Spread and Usage
Soft butch had spread and is known far and wide, thanks to the achievements of the LGBT community, in the last and this century.
Urban Dictionary defined soft butch as early as 2003.
Today we may find the expression on sites like LinkedIn, Tumblr and Pinterest.