Bitcoin NUPL data suggests that crypto cycles are becoming less bullish over time as profit tops and loss bottoms are not following a horizontal line.
Bitcoin did not exceed the NUPL 0.75 “greed” mark during this cycle
As explained by an analyst in a Cryptoquant post, the BTC profit and loss cycle should not be considered along horizontal lines.
“Net Unrealized Profit and Loss” (or NUPL for short) is an indicator that tells us whether the market as a whole is a net profit or a net loss.
The value of the metric is calculated by taking the difference between the market cap and the actual cap and dividing by the market cap.
NUPL = (Market Cap – Realized Cap) Market Cap
When the value of this indicator is greater than zero, it means that the average investor is currently making some profit.
On the other hand, negative NUPL values mean that there is a net amount of unrealized loss in the overall market at the moment.
Now, here is a chart that shows the trend in the Bitcoin NUPL over the history of the crypto:
Looks like the value of the metric has surged up and turned positive again recently | Source: CryptoQuant
As you can see in the above graph, volume has marked relevant areas of trend for the Bitcoin NUPL indicator.
In the past, many traders believed that the cycle was topped off whenever the value of the metric was above 0.75, entering “greed” territory.
Similarly, bottoms were thought to have reached “fear” territory when the indicator dropped below the -0.4 mark.
However, the Post’s analyst argues that such horizontal lines should not be used to mark the top and bottom of these cycles.
During the last two cycles, the top that came out was lower than the first one. In the current cycle, the metric never got into the greed zone and topped only around the 0.75 level. This could mean that the tops are getting lower and lower with each cycle.
Similarly, the last two bottoms also had declining volumes. Sometime back, the value of NUPL fell sharply into negative and later came back to positive values after forming a potential bottom. However, it was a far cry from the less traditional 0.4 mark.
If this low was indeed the bottom for this cycle, it would give more credence to the idea that profit and loss fluctuations in the market are becoming less drastic over time.
btc price
At the time of writing, bitcoin is priced around $24.4k, up 5% over the past week.
The value of the crypto seems to have been moving sideways recently | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com