On-chain data shows that the Bitcoin NUPL metric has now fallen to its lowest levels since the collapse of COVID-19 in 2020.
Bitcoin’s Net Unrealized Profit and Loss Drops Recently
As explained by an analyst at CryptoQuant mailthe previous trend of NUPL may indicate that the current values may be favorable for a rebound in the cryptocurrency’s price.
The “net unrealized profit and lossor NUPL for short, is an indicator defined as the difference between the current market value of bitcoin and the realized financial value, divided by the market capitalization of the market.
The Max Realized checks the price at which each coin in the chain was last moved and, using these rates, calculates the cryptocurrency’s capitalization (while the normal market cap takes the sum of the value of all coins at the current price).
What this metric tells us is whether BTC market participants as a whole are currently holding a profit or a loss.
When the ratio value is above zero, it means that the market as a whole is currently in profit. On the other hand, values less than zero indicate that the shareholders are now bearing a loss.
Related reading | Bitcoin selling pressure continues as long-term holder SOPR rises
Of course, a scale that is exactly zero indicates that investors as a whole have broken so far.
Now, here is a chart showing the trend in the Bitcoin NUPL scale over the past few years:
It seems like the value of the metric has touched into the green zone recently | Source: CryptoQuant
As you can see in the above chart, Quantum has marked the different areas of the Bitcoin NUPL indicator with different colors.
The ratio appears to have noticed some decline recently, and has now fallen into the “green” zone for the first time since COVID-19 crash.
Related reading | More Pressure on El Salvador as Bitcoin Drops to $29,000
In the history of cryptocurrency, there have been multiple instances where shortly after the indicator reached this area, the price experienced an upward reversal.
However, there is also the example of 2018, where Bitcoin NUPL has been moving sideways in the green for a long time, until the value of the coin finally notices a sharp drop, which leads to a loss in the market.
It now remains to be seen whether the cryptocurrency will follow a rebound pattern this time around, or if it will show a similar trend in 2018.
At the time of writing this report, Bitcoin price It is floating around $30.2K, down 1% in the past week.
Looks like the price of the crypto has been moving sideways around $30k recently | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com