On-Chain data shows that two Bitcoin indicators are currently retesting levels that have been relevant for market trends in the past.
One such indicator is the BTC NUPL (Net Unrealized Profit/Loss), which is currently neutral for both short-term and medium-term holders, according to an analyst in a CryptoQuant post. The NUPL tracks the net amount of profit or loss that investors currently hold by examining the on-chain history of each individual coin in circulation to see at what price it was last moved. If this previous settlement price for any coin was lower than the current spot price of Bitcoin, then that particular coin is currently holding a profit.
The NUPL calculates this profit as the coin retains the unrealized profit. Similarly, the loss contained in underwater coins is factored into the unrealized loss. The metric then uses the difference between these two figures to determine the net profit/loss status of the entire market.
In the context of the current discussion, the entire market is not of interest, but rather specific sub-sectors. Particularly relevant are two BTC cohorts called Short-Term Holders (STHs) and Mid-Term Holders (MTHs).
STHs include all investors who have purchased their coins within the last six months, while MTHs are those who have held their coins for at least six months and up to two years.
Here is an initial chart showing the trend of Bitcoin NUPL specifically for STHs:
The chart above shows that the value of the metric has recently approached zero | Source: CryptoQuant
As shown in the chart above, the Bitcoin STH NUPL has been positive during this rally that began in January of this year. This is generally the case during upward trends, as STHs are those who have purchased relatively recently, so any price increase immediately impacts their profit/loss status.
However, more significant is the indicator’s relationship to the zero mark. At this line, STHs as a whole are neutral, meaning their unrealized losses are equal to their unrealized gains.
Usually, during upward trends, when the indicator retests this line from above, it finds support, and the price experiences an upward effect. This could be seen in action during this rally alone, as the recoveries in March and June each occurred when the STH NUPL approached this line.
From the chart, it can be seen that the metric has recently fallen back to this line. This retest could be very important, as a drop below it could mean a reversal back into a bearish regime.
The following chart also shows that the MTH NUPL is retesting the same line, although this indicator is approaching this line from the negative range.
The metric is retesting the break-even line | Source: CryptoQuant
So far, MTHs have had to book losses, but currently, they are on the verge of returning to profitability. If the metric manages to break through this level, it would be a positive sign for the rally, as the upward trend has always continued when these investors have returned to being above water.
However, the break-even line, which represents resistance for Bitcoin, is also a possibility. In this case, the asset would experience a bearish effect. It now remains to be seen how this retest, as well as that of the STH NUPL, would develop in the coming days.
At the time of writing this article, Bitcoin is trading at around $29,000, which represents a 1% decrease in the last week.
Bitcoin continues to move sideways | Source: BTCUSD on TradingView. Featured image by Michael Förtsch on Unsplash.com, charts by TradingView.com, CryptoQuant.com