On-chain data shows that the Bitcoin Net Unrealized Profit and Loss (NUPL) has recently found rejection in the long-term resistance zone.
Bitcoin NUPL has seen some decline in recent days
As explained by an analyst in a CryptoQuant after, the BTC NUPL metric has failed to clear major resistance. The “NUPL” is an indicator that tells us about the amount of unrealized profit or loss currently held by the investors.
By “not realised” here it means that the holders have accrued profits/losses (because the price is higher/lower than they bought the coins for), but they have not actually sold their BTC yet to set it in stone.
When such investors who have unrealized gains/losses eventually sell, the gains/losses they previously had are said to be “realized.”
When the value of the NUPL is greater than zero, it means that the average investor is currently making a profit on their coins. On the other hand, the fact that the indicator is below this threshold suggests that the market as a whole is currently experiencing some losses.
The zero value of the metric itself, of course, represents the break-even level, since the total amount of unrealized gains in the market equals the unrealized losses at this point.
Here is a chart showing the trend in the Bitcoin NUPL as well as the 365-day moving average (MA) over the past few years:
The value of the metric seems to have been going down in recent days | Source: CryptoQuant
In the chart above, the quant has marked the “long-term resistance” zone that Bitcoin NUPL appears to have tracked historically. This area, which lies between the values of 0.31 and 0.38, has been an important retest for the cryptocurrency, as failure here often signaled the start of a withdrawal.
However, coming from above, there have also been bullish retests of this zone as the points marked with green ticks appear on the chart. A prominent example of such a successful retest was in July 2021, when BTC reached a local bottom and continued through the second half of the subsequent 2021 bull run.
The bearish resistance example appears to have formed recently as the indicator recently entered the zone but was rejected to the downside. And with it the price of the asset. It is not yet certain, but this rejection may have led to an extended withdrawal of the coin.
“Since the NUPL index has also formed a bearish Head & Shoulders (H&S) pattern, this could mean that Bitcoin could fall in the $24,000-$20,000 range,” notes the quantity. “With the successful implementation of the H&S, the local upward trend of the NUPL index is also broken.”
The Bitcoin NUPL has also shown interesting interactions with its annual MA in the past; at this level, too, the indicator has sometimes encountered resistance or support.
“The final frontier for sustaining Bitcoin bullishness is the 365-day MA, which acts as reliable long-term support,” the quantity says. “To invalidate the above scenario, it is necessary to sustainably overcome long-term resistance!”
BTC price
At the time of writing, Bitcoin is trading around $26,300, down 2% over the past week.
BTC has plunged recently | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com