Quant Explains How Bitcoin NUPL Cycles Are Getting Less Volatile With Time
August 14 2022 - 3:00PM
NEWSBTC
Bitcoin NUPL data suggests that the crypto’s cycles are getting
less sharper with time as profit tops and loss bottoms aren’t
following a horizontal line. Bitcoin NUPL Didn’t Exceed The 0.75
“Greed” Mark During This Cycle As explained by an analyst in a
CryptoQuant post, the BTC profit and loss cycles shouldn’t be
treated with horizontal lines. The “Net Unrealized Profit and Loss”
(or the NUPL in brief) is an indicator that tells us whether the
market as a whole is holding a net profit or a net loss right now.
The metric’s value is calculated by taking the difference between
the market cap and the realized cap, and dividing it by the market
cap. NUPL = (Market Cap – Realized Cap) ÷ Market Cap When the value
of this indicator is greater than zero, it means the average
investor is currently holding some profits. On the other hand,
negative NUPL values imply the overall market is holding a net
amount of unrealized loss at the moment. Related Reading: Ethereum
Market Observes Pileup Of Leverage As ETH Breaks $2k Now, here is a
chart that shows the trend in the Bitcoin NUPL over the course of
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, the quant has marked the
relevant zones of trend for the Bitcoin NUPL indicator. In the
past, many traders used to believe that cycle tops form whenever
the metric’s value surges above 0.75, entering into the “greed”
zone. Similarly, bottoms were thought to take place when the
indicator went below the -0.4 mark, reaching into the “fear”
region. Related Reading: Bitcoin Bearish Signal: Whales With 1k-10k
BTC Depositing To Exchanges However, the analyst from the post
argues that horizontal lines like these shouldn’t be used to mark
these cycle tops and bottoms. During the previous two cycles, the
top that came after was lower than the one before. In the current
cycle, the metric never crossed into the greed zone and topped out
just around the 0.75 level. This could mean that tops are getting
lower and lower with each cycle. Similarly, the last two bottoms
also had descending loss amounts. Just a while ago, the NUPL’s
value sharply dropped off into negative and subsequently rebounded
back up into positive values after forming a potential bottom.
However, this low was far from the conventional 0.4 mark. If this
low was truly the bottom for this cycle, then it would add further
credence to the idea that profit and loss fluctuations in the
market are getting less drastic with time. BTC Price At the time of
writing, Bitcoin’s price floats around $24.4k, up 5% in 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
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