Bitcoin’s price has dropped below $38,000 today, extending its steady decline. BTC price is hovering around $37.6k at the time of writing, down 10% in the last seven days. The cryptocurrency has lost 8% of its value in the last month.
While the price falls, a quant explains how the Bitcoin NUPL indicator might indicate the start of a fresh bull run based on previous patterns. The various phases of the NUPL indicator, as stated by an analyst in a CryptoQuant post, may give some light on the bull run status for BTC.
The difference between the market cap and the realized cap, divided by the market cap, is the net unrealized profit and loss (or NUPL for short). This indicator indicates the current level of profit or loss experienced by Bitcoin investors as a whole.
When NUPL values are more than zero, it suggests that holders are profiting on average. If the indicator’s value is greater than zero, however, the market as a whole is profitable. Here’s a graph that displays the BTC NUPL’s trend over the last ten years:
The quant has indicated three different regions of relevance for the Bitcoin NUPL metric, as you can see in the graph above.
It appears that anytime the measure crosses over the red line, a BTC bull run follows behind. On the other hand, the green region appears to be when the cryptocurrency is undervalued and bottom formations occur. The yellow region, according to the researcher, is a dividing line between bull and bear trends. A break below this indicator has traditionally signaled the start of a new bear market.
The Bitcoin NUPL is currently just above this level, and if it drops and crosses below it, a new bear session could begin. However, as the quant has pointed out, this region can also act as support in the middle of a cycle, as it did lately.