The NUPL indicator of Bitcoin shows the struggle between fear and optimism regions, and the current adjustment has returned to the fear region.Despite recent surrender, short-term Bitcoin holders have shown signs of reversal, indicating a potential strong return in the market
- The NUPL indicator of Bitcoin shows the struggle between fear and optimism regions, and the current adjustment has returned to the fear region.
- Despite recent surrender, short-term Bitcoin holders have shown signs of reversal, indicating a potential strong return in the market.
- Chain analysts say that Bitcoin prices are unlikely to fall significantly further, suggesting a bullish rebound.
Since reaching a local peak of $28580 on October 2nd, Bitcoin prices have been adjusting. Afterwards, bears successfully lowered the price of the largest cryptocurrency to the $26500 range. What will happen to the BTC price next?
At the same time, the famous on chain unrealized net profit and loss (NUPL) indicator shows the ongoing struggle between the fields of fear and optimism. Although 2023 started bullish and fled the surrender zone, the adjustment in Bitcoin prices continued to return to the fear zone.
Can the Bitcoin Risk Index, which has fallen to a low point, ultimately keep the cryptocurrency market in an optimistic range and start a new bull market?
NUPL is between fear and optimism
Net Unrealized Profit/Loss (NUPL) is an on chain metric used to calculate the difference between relative unrealized profit and relative unrealized loss.
Another method of calculating this ratio is to subtract the realized market value from the total market value, and then divide the result by the latter.
The NUPL chart contains five horizontal regions, explained from the perspective of market psychology: from the red capital level to the blue regions of pleasure and greed.
There are bullish and bearish explanations for the middle region, depending on whether the chart crosses the region during a bull or bear market.
At present, Bitcoin NUPL is in a yellow, relatively neutral optimistic range of 0.26. At the same time, this indicator approaches the fear level of orange, which started after falling below 0.25.
As we can see, the optimistic region is the highest level of Bitcoin NUPL since early 2023. As of mid January, the indicator was still consolidating at its lowest surrender level, but became optimistic with the rapid recovery of the cryptocurrency market.
However, further adjustments and testing of the $20000 area may still put NUPL back into a state of fear.
Short term holders continue to surrender, but there are signs of a reversal
In contrast, based on the same indicators as short-term holders (STH), we find that new investors are still experiencing surrender.
The NUPL of STH only considers UTXO that is less than 155 days. In other words, it calculates the unrealized profits/losses of new Bitcoin holders.
The chart version reveals a cruel fact: most new investors are still underwater. Indeed, the beginning of the year brought them a relaxed period and also brought them back to a state of fear. More importantly, the short-term NUPL was even in an optimistic region (March 20th).
However, since mid August, short-term holders have been experiencing continuous surrender.
Nevertheless, well-known on chain analysts@_ Checkmate_ A chart that may contain optimistic signals was posted on X. He pointed out the profit and loss momentum indicators related to STH and NUPL. He believes that:
Short sellers hold a negative view on the price falling from $29000 to $26000. However, they were unable to lower it. Despite significant losses suffered by the market (which is the most pessimistic since the FTX)
He added that the indicator has turned green again, indicating that STH's profit/loss momentum may rebound. Therefore, the conclusion drawn by analysts is that this may lead to two possible scenarios: final profit taking before deep adjustments or strong returns.
Finally, he added that in terms of the macro market, he personally leans towards the latter situation.
Bitcoin Low Risk Index
Finally, another on chain analyst @ Negentopic_ Recently, the so-called Bitcoin Risk Index was released on X. According to his data, Bitcoin prices are currently in the low-risk blue zone, fluctuating around 0.
In his view, this indicator indicates that further decline is "unlikely at this stage" after the recent decline.
This explanation is consistent with the current downward trend, during which bears are unable to push the BTC price below $26000. If this level is maintained and the signal of NUPL is confirmed, the cryptocurrency market may soon experience a bullish rebound.
However, if the $26000 area is missed, there is a high possibility of a deeper pullback. This may return NUPL to a state of fear. On the other hand, short-term holders still cannot make any profits.
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