In today’s analysis, BeInCrypto looks at one of the most famous on-chain indicators for Bitcoin: Net Unrealized Profit/Loss (NUPL). The positive price action of Bitcoin (BTC) in the first weeks of 2023 caused the indicator to generate a signal to start a bullish cycle.
For the first time since August 2022, the NUPL 14-day moving average turned positive and entered orange territory. Historically, this event has been correlated with the end of the accumulation phase and the beginning of a new bull market. Moreover, based on the historical BTC price data and our indicator, it is possible to try to estimate the timing and size of the next bull market.
NUPL enters the Realm of Hope
Net Unrealized Profit/Loss shows the difference between Relative Unrealized Profit and Relative Unrealized Loss. Another way to calculate this indicator is to subtract the realized market capitalization from the total market capitalization, and then divide the result by the final value.
In the previous bull market, the NUPL 14-day moving average peaked at 0.73 on February 2, 2021, when the price of BTC was $54,000. After that, Bitcoin still continued its upward rally, but NUPL did not increase higher.
Even during the ATH at $69,000 in November 2021, the index was in the vicinity of 0.63. It is worth mentioning that during the entire previous bull market, it did not exceed the value of 0.75 once, above which lies the blue euphoria/greed area. The flat top of the previous bull market, which fits the Wyckoff distribution pattern, only brought NUPL to the green belief/denial level.
After that, throughout the 2022 bear market, NUPL continued to fall along with the price of Bitcoin. It entered red capitulation territory for the first time in June and the second time in August (gray circles).
After a second decline to negative territory, it remained negative for another five months. During this period it also recorded a capitalization low of -0.21, which came just a day after BTC price lows at $15,476 on November 21, 2022. It only returned to the orange hope/fear territory a few days ago, and reached it was 0.05 yesterday.
NUPL Signals Start of Bull Market
On the long-term chart of NUPL and BTC price, we see the importance of the return of the indicator to positive territory. This event was usually the end of not only a bear market, but also the accumulation phase of several months that followed (green circles).
In both 2015 and 2019, there was a perfect correlation between NUPL’s return to orange values and the end of accumulation. The situation was a little different after the first historical bear market in 2012. At that time, the index increased to a positive end, only to return to the capitalization area later and increase again (blue and green circles).
We are seeing a similar situation in the current cycle. The crash in the cryptocurrency market that caused the collapse of the Terra ecosystem (LUNA) was the first catalyst for the movement of the indicator to the capitalized area. A return to the orange level failed to start a rebound, and NUPL fell back into red territory to reach the bottom after the fall of the FTX exchange in November 2022.
However, a second return to the optimism zone could signal the end of the accumulation phase. This is confirmed by the price of BTC, which is currently oscillating around $23,000. Recently, Bitcoin price broke through an important resistance at $21,500. In doing so, it posted its first long-term high higher since the end of the previous bull market.
How high will the Bitcoin price go?
Based on the above premises, one can try to estimate the timing and magnitude of Bitcoin’s peak in the next bull market. Of course, two assumptions must be proven true. First of all, the bottom of the BTC price has already been reached. Secondly, the return of NUPL to the orange area signals hope for the end of the accumulation phase.
Additionally, the premises of Bitcoin’s elongated cycles and diminishing returns must be accepted. These stem from historical data, which indicates that each successive peak in BTC price has been proportionally lower than the previous one. Moreover, it was discovered after a longer period of time. Counting from the NUPL signal to the peak of historical bull markets, we find the following data:
- 2012-2013: NUPL token on April 16, 2012, BTC up 23,606% after 588 days,
- 2015-2017: NUPL token on October 28, 2015, BTC up 6,836% after 777 days,
- 2019-2021: NUPL token on April 8, 2019, BTC up 1,233% after 945 days.
Keeping the above ratios of cycle extension (1.26x on average) and diminishing returns (4.5x on average), we can consider the peak of another bull market. Based on simple calculations and keeping the given proportions, we find the potential peak price of Bitcoin at $78,000 on January 5, 2026.
This hypothesis certainly does not give credence to the prospect of a Bitcoin price above $100,000. However, based on historical BTC price data and the NUPL indicator, it is what can be realistically expected.
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