On-chain data shows the Bitcoin Net Unrealized Profit/Loss (NUPL) is currently nearing a key retest. Will this help BTC rebound?
Bitcoin NUPL Has Been Declining Towards 365-Day MA Recently
As pointed out by an analyst in a CryptoQuant post, the BTC NUPL is approaching a retest of the 365-day MA right now. The “NUPL” is an indicator that tells us about the total amount of unrealized profit or loss that the Bitcoin market as a whole currently holds.
“Unrealized” here refers to the profit or loss of a coin that is yet to be locked in, as the investor is still holding the coin. If the coin was to be sold, however, the unrealized profit or loss it was carrying would then become “realized.”
The metric’s value is calculated by first taking the difference between the market cap and the realized cap (the realized cap being a fair value model for the cryptocurrency) and then dividing it by the market cap.
When the value of the indicator is greater than zero, it means the market cap is more than the realized cap right now, and hence, there is a higher amount of profit than loss among investors currently. On the other hand, negative values imply losses dominate the market at the moment.
Naturally, the NUPL having a value exactly equal to zero suggests the amount of profit is exactly making up for the amount of loss being held by the holders currently.
Now, here is a chart that shows the trend in the Bitcoin NUPL, as well as in its 365-day moving average (MA) over the last few years:
The value of the metric seems to have been going down in recent days | Source: CryptoQuant
As shown in the above graph, the Bitcoin NUPL shot up and crossed the 0 level last month as the price of the cryptocurrency rallied. This means that due to the surge in BTC’s value, the average investor had come into a state of unrealized profit.
In this rapid increase, the indicator had also successfully managed to break above its 365-day MA. This was reminiscent of the April 2019 rally, where the NUPL had displayed a similar break.
However, unlike the April 2019 rally, the current one looks to have failed to cross above the 0.15-0.25 zone (which has offered resistance historically) and the metric is now plunging back down.
Following this rejection, the Bitcoin NUPL is now once again near its yearly MA. This level has generally acted as support during periods of a bullish trend, so if the current market is truly transitioning away from a bear market (like in April 2019), then the retest should hold and help the price rebound.
The quant notes that if the rebound is successful, a break above the aforementioned 0.15-0.25 resistance zone would still be needed to confirm a “solid” bullish momentum.
At the time of writing, Bitcoin is trading around $21,600, down 5% in the last week.
Looks like BTC has been consolidating since the decline | Source: BTCUSD on TradingView