Bitcoin (BTC) Failed Profit/Loss (NUPL) between fear and optimism

After reaching a local high of $28,580 on October 2, the price of Bitcoin is correcting. Since then, the bears have managed to lower the price of the largest cryptocurrency to $26,500. What's next for the price of BTC?

At the same time, the popular on-chain net profit/loss (NUPL) indicator shows the battle between fear and optimism positions. Despite the 2023 mass launch and possible escape from the cap zone, Bitcoin price corrections continue to return to fear territory.

Will the Bitcoin Risk Index, which is currently at low levels, finally put the cryptocurrency market on a positive note and start a new bull market?

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NUPL between fear and optimism

Net Unrealized Profit/Loss (NUPL) is an on-chain metric that calculates the difference between net unrealized profit and net unrealized loss.

Another way to calculate this ratio is to subtract the guaranteed market capitalization from the total market capitalization and divide the result by the latter.

The NUPL chart contains five horizontal areas, which are interpreted in terms of market psychology: from the red level of capitalization to the blue level of excitement and greed.

Intermediate positions have both bullish and bearish meanings, depending on whether the chart crosses the area into a bull or bear market.

Currently, Bitcoin NUPL is in the yellow, rather neutral hope area at 0.26. At the same time, after the indicator falls below 0.25, it is close to the orange panic level.

As we can see, the place of optimism is Bitcoin NUPL, the highest level since the beginning of 2023. As of mid-January, the indicator was consolidating at the lowest level of capitalization, but the cryptocurrency market is rapidly recovering, creating optimism. .

However, the sight of a deep correction and a test around $20,000 could still take NUPL into fear territory.

Short-term holders continue to rally, but there are signs of a reversal.

Conversely, when we look at the same indicator for short-term holders (STH), we see that new investors are still experiencing capital.

NUPL only considers UTXOs that are less than 155 days old for STH. In other words, it calculates an unproven profit/loss for new Bitcoin owners.

This chart version shows the brutal truth that most new investors are still underwater. Admittedly, the beginning of the year brought them back to the area of ​​relief and fear. Moreover, the short-term NUPL has been optimistic for some time (March 20).

However, since mid-August, short holders have been experiencing continued capital loss.

Despite this, popular chain analyst @_Checkmatey_ has published a chart that may bear good marks on X. A Profit/Loss Momentum indicator has been suggested for STH related to NUPL. In his opinion:

“The bears turned negative on the selloff from $29k to $26k. But they couldn't take it lower. Despite the market's biggest losses (the weakest market since FTX).

The indicator will turn green again, indicating that STH's profit/loss momentum is likely to come. Therefore, the analyst, this can lead to two possible situations: the last profit before the deep correction or the return of strength.

Finally, he adds personally – in the context of the macro market – a turn to the last state.

Bitcoin low risk index

Finally, another on-chain analyst @Negentropic_, recently published on X the so-called Bitcoin Risk Index. According to the data, the price of BTC today is in the blue area of ​​low risk, where it fluctuates to 0.

In his view, this measure suggests that after recent declines, a deeper move down is “unlikely at this stage.”

This interpretation is consistent with the current declines, where the bears were unable to push the price of BTC below $26,000. If this level is maintained and the signals from NUPL are confirmed, the cryptocurrency market may soon experience a bullish resurgence.

However, if around $26,000 is lost, a deeper correction is likely. It will probably lead NUPL to an area of ​​fear. Short-term holders, on the other hand, will still be far from any profit.

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