Happen[in]Crypto watch on-chain indicators for Bitcoin (BTC), specifically the Net Real Profit/Loss (NUPL) indicator. This is done to determine if BTC has reached a bottom or if it is still in the middle of a prolonged bear market.
NUPL is an on-chain indicator which shows whether the market is in profit or loss position. It is created by simply dividing relative unrealized profits by relative unrealized losses.
Negative values indicate that the market is in a position of loss, while positive values indicate that it is in a position of profit.
Loss position means that if all the coins bought at a price higher than the current market price were sold, the value would be higher than all the coins that were bought at a price lower than the current market price.
Historically, market cycles have reached or near the top 0.75 (blue), while the bottom has reached below 0 (red).
There is an interesting correlation between the BTC market cycle and the NUPL with respect to subsequent movements above and below the 0.5 line. Following a continued upward trend, a cross (black circles) below 0.5 indicates that a new, bearish market cycle has begun.
However, sometimes two crosses are needed to initiate a downward trend.
NUPL fell below 0.5 for the second time in January 2022 and has been falling sharply since then.
In the last two market cycles, once the NUPL fell below 0.5, it jumped sharply (dark circles). This was the result of the last relief rally before another shortfall.
This was not the case in the current breakdown (blue circle). Once the indicator fell below 0.25, it continued its descent and fell to -0.06 on June 19. This is the same level reached in March 2020 (red circle). It also took a new all-time low in the net real profit/loss indicator.
When will BTC go down?
The last two market cycle bottoms (black circles) were reached at -0.56 and -0.36 respectively. Compared to them, the current reading still has a lot of room for decline. However, it is noteworthy that the 2015 low was reached 19 days after NUPL entered negative territory. Similarly, the 2018 low was reached 24 days after such a decrease. So, even if this were to happen, a complete bottom would be expected soon.
If it is not absolute but it is a local bottom similar to March 2020, then it is possible that BTC has already bottomed out and will continue to move towards new highs.
In any case, it looks like at least one relief rally is likely.
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