Silhouette of a walking bear with declining financial chart and stock market background
On-chain data shows that Bitcoin Net Unrealized Profit and Loss (NUPL) has been facing rejection in the long-term resistance zone as of late.
Bitcoin NUPL has seen some decline over the past few days
As an analyst explained in a CryptoQuant post, the BTC NUPL indicator failed to clear a major resistance. The NUPL is an indicator that tells us how much unrealized gain or loss investors are currently holding.
By unrealized here, we mean that the holders have accumulated gains/losses (because the price is higher/lower than the price they bought the coins at) but they haven’t actually sold their BTC to get them yet to be carved in stone.
When those investors holding unrealized gains/losses eventually sell, the gains/losses they previously held are said to be ‘realised’.
If 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 sitting at some loss.
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 that level.
Here is a chart showing the trend of the Bitcoin NUPL as well as its 365-day moving average (MA) over the past few years:
The value of the metric seems to have decreased in the past few days | Source: CryptoQuant
In the chart above, the quant marks the “long-term resistance zone” that Bitcoin NUPL appears to have followed historically. This area, lying between the 0.31 and 0.38 levels, was a key retest for the cryptocurrency as a failure here often signaled the start of a decline.
However, there have also been bullish retests of this zone from above, as indicated by the green tick points on the chart. A prominent example of such a successful retest was in July 2021, when BTC hit a local bottom and following that, the second half of the 2021 bull market began.
The example of bearish resistance seems to have formed recently as the indicator recently entered the zone but was rejected down. And with it the price of the asset. It is still uncertain, but this rejection may have led to a prolonged decline for the coin.
“Given that the NUPL index has also formed a bearish head and shoulders (H&S) pattern, this could mean that bitcoin could fall into the $24,000-$20,000 range,” the quantification reads. “With the successful implementation of the H&S, the local upward trend of the NUPL index will also be broken.”
The Bitcoin NUPL has also shown interesting interactions with its annual MA in the past; Even at this level, the indicator has sometimes found resistance or support.
“The final border for maintaining the Bitcoin uptrend is the 365-day MA, which acts as a reliable long-term support,” says the quant. “For the above scenario to be invalidated, 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 recently collapsed | Source: BTCUSD on TradingView
Selected image from iStock.com, charts from TradingView.com, CryptoQuant.com
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