BeInCrypto analyzes the Bitcoin Net Unrealized Profit Loss (NUPL) indicator to determine the magnitude of the current BTC supply that is in profit and loss.
NUPL
NUPL is an on-chain indicator that measures the total profit or loss in the market. A reading below 0 indicates that the overall market is losing, while those above 0 indicate that the market is in a profit. Similarly, a reading of 0.5 suggests that half of the current BTC supply is in profit, while the other half is in the red.
Historically, values above 0.75 (blue) correspond with the top of the market while values below 0.25 (red) correspond with the bottom of the market.
market cycle analysis
The most interesting relationship of NUPL with previous bitcoin market cycles appeared during the 2018 correction. More specifically, generating with readings above and below 0.5.
During the 2015-2018 bull run, NUPL broke above 0.5 (black circle) in January 2017 and remained above the line until a correction in early 2018. The start of the correction (red circle) was marked by a breakdown. below 0.5 value.
In the current market cycle, NUPL crossed 50 (black circle) for the first time in October 2020. This cross was preceded by a move towards the current all-time high of $69,000.
Since then, the readings have varied between 2015-2018. The value of NUPL crossed below the 0.5 line (red circle) in July 2021 before crossing above and below 0.5 in January 2022.
2011-2014 market cycle
While not identical, there are some similarities between the current NUPL values and the values observed in 2012 and 2013.
In August 2012, NUPL briefly went above 0.5 and then fell below (black circle). However, instead of marking the start of a correction, the price surged higher and reached a new all-time high.
Thereafter, the indicator once again fell below 0.5 before retesting the line (red circle). This led to another all-time high.
Finally, the third drop below 0.5 was the decisive example that confirmed that a correction had begun. This was later confirmed with a decrease below 0.25 (blue circle).
Hence, as long as NUPL is hovering above 0.25, there are chances of a bullish reversal. However, a drop below 0.25 would confirm that a true trend correction has started.
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