Quant Explains How Bitcoin NUPL Cycles Become Less Volatile Over Time


The Bitcoin NUPL data suggests that cycles in the crypto become less sharp over time, as profit highs and loss lows do not follow a horizontal line.

Bitcoin NUPL has not exceeded the 0.75 “greed” mark this cycle

As one analyst explained in an article on CryptoQuant, BTC profit and loss cycles should not be treated with horizontal lines.

The “Net Unrealized Profit and Loss” (or NUPL for short) is an indicator that tells us whether the market as a whole is holding a net profit or a net loss right now.

The value of the metric is calculated by taking the difference between the market capitalization and the realized capitalization, and dividing it by the market capitalization.

NUPL = (market cap – realized cap) ÷ market cap

When the value of this indicator is greater than zero, it means that the average investor is currently holding profits.

On the other hand, negative NUPL values ​​imply that the overall market holds a net amount of unrealized loss at the moment.

Now, here is a chart that shows the trend of Bitcoin NUPL over the history of the crypto:

Looks like the value of the metric has surged up and turned positive again recently | Source: CryptoQuant

As you can see in the chart above, the quant has marked relevant trending areas for the Bitcoin NUPL indicator.

In the past, many traders believed that cycle tops formed whenever the value of the metric exceeded 0.75, entering the “greed” zone.

Similarly, bottoms were thought to occur when the indicator crosses below -0.4, reaching the “fear” region.

However, the post analyst argues that horizontal lines like these should not be used to mark these cycle highs and lows.

In the previous two cycles, the peak that followed was lower than the one that preceded it. In the current cycle, the metric never crossed the greed zone and topped just around the 0.75 level. This could mean that the highs are getting lower and lower with each cycle.

Similarly, the last two lows also had decreasing loss amounts. Not long ago, the value of the NUPL fell sharply into negative and then rebounded into positive values ​​after forming a potential bottom. However, this dip was far from the conventional mark of 0.4.

If this low was truly the lowest of this cycle, it would add credence to the idea that profit and loss swings in the market become less drastic over time.

BTC price

At the time of writing, the price of Bitcoin is hovering around $24,400, up 5% in the past week.

Bitcoin Price Chart

The value of the crypto seems to have been moving sideways recently | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com
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