4 pointers on the key chain point to Bitcoin’s pre-halving correction
As the price of Bitcoin continues to rise, on-chain signals point to an overheated cryptocurrency market. These signals are proving particularly useful in the context of the Bitcoin halving.
BeInCrypto offers 4 on-chain signals indicating that a correction may be imminent. This is especially important given the current price action, which shows many similarities to the 2019 fractal.
During that time, the price of BTC also experienced a strong uptrend, with a deep correction just a few months before it was halved. Does the data on the chain support these predictions? Does Halving Correlate With Bitcoin Price Decline?
Signs on the chain: NUPL has entered the realm of trust
In addition to the many technical similarities between the current state of the Bitcoin market and the 2019 fractal, on-chain analysis points to parallels. The first two indicators on the chain concern the popular Net Unrealized Profit/Loss (NUPL) indicator.
NUPL is the difference between non-relative profit and non-relative loss. This ratio can be calculated by subtracting the earned capitalization from the market capitalization and dividing the result by the market capitalization. Moreover, NUPL comes in several variants: for all market investors, for long term holders (LTH) and for short term holders (STH).
Read more: Bitcoin Half Cycles and Investment Strategies: What to Know
On the chart of the basic index version, we see that in December 2023 and January 2024, NUPL is in the green confidence area. During a mature bull market, this area shows a healthy market in strong growth.
However, historically, the first entry into this area after a macro bottom in previous cycles (red circles) indicates an impending correction. Indeed, failures followed fairly quickly after the belief position was initially reached (blue circles). Then, NUPL returns to the Yellow Hope area.
However, in 2019 and early 2020, NUPL is down again in the orange (prospect) and red (capital) positions. If history is anything to go by, now – after a brief stay in the green – an upcoming correction on the NUPL chart could signal a bearish trend for Bitcoin.
It is worth adding that the same situation is observed for long term holding (LTH) in NUPL chart. This category includes addresses that have held their property for at least 155 days. The first short visit to the green area after the macro low also resulted in a correction.
Profits that remind you of the division of 2019
The on-chain signals we analyze are considered indicators associated with NUPL, but instead of failed profit/loss, it shows realised. Net Profit/Loss is the net profit or loss of all traded coins and is defined as the difference between realized profit and actual loss.
The higher the graph reaches the green area, the greater the realized profit registered by Bitcoin market participants. Conversely, many investors realize losses and sell BTC when the red bars are long.
We are seeing a major breakout on the net profit/loss indicator chart. It follows long-term growth and is similar to the situation in 2019 (blue circles). In the previous cycle, this led to a 53% correction, which was later exacerbated by the COVID-19 crash (red arrow).
If a similar scenario occurs, the price of Bitcoin may return to the $23,000 – $28,000 range. As much as this will happen in 2019, this is even more likely since the split comes just months before the Bitcoin halving.
On-chain tokens: A percentage of UTXO enters the oversold area.
The final on-chain signal that suggests there may be a BTC price correction soon is the UTXO gain percentage. This is the percentage of unspent transaction output (UTXO) whose price was lower than the current price at the time of creation. In other words, this indicator shows how many BTC addresses are currently in profit.
A long-term chart shows a level above 95% marked in red. Here again – with strong growth – almost all UTXO are in profit. Moreover, when Bitcoin records an all-time high (ATH), 100% of UTXOs are in profit.
On the other hand, In 2019, after breaking the macro lows of the previous cycle, the situation on this chart is similar to the NUPL chart signals. So is the time before Bitcoin's next halving. We see a brief retracement of the red oversold area, followed by a correction.
If the situation repeats itself, the first quarter of 2024 could be a period of decline in the cryptocurrency market. This is likely due to pre-half hype and excitement, especially following the approval of the spot Bitcoin ETF.
Read more: What is Bitcoin Half?
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Disclaimer
In accordance with Trust Project guidelines, this price analysis article is for informational purposes only and should not be construed as financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions. Please note that our terms and conditions, privacy policies and disclaimers have been updated.
