On-chain data shows that Bitcoin Net Unrealized Profit and Loss (NUPL) recently found rejection at the long-term resistance zone.
Bitcoin NUPL has seen some decline over the past few days
As explained by an analyst in CryptoQuant post, the BTC NUPL metric failed to clear major resistance. The «NUPL» is an indicator that tells us the amount of unrealized profit or loss that the investors are currently holding.
By «unrealized,» what is meant here is that the holders have accumulated profits/losses (due to the price being more/less than what they bought the coins for), but their BTC still to sell them to set them in stone.
When such investors with unrealized profits/losses eventually sell, the previously held profits/losses are said to have been “realized”.
When the value of the NUPL is greater than zero, it means that the average investor is currently carrying a profit on their coins. On the other hand, the indicator below this threshold indicates that the market as a whole is currently experiencing some losses.
The zero value of the metric itself naturally represents the break-even level, since the total amount of unrealized profits in the market is equal to the unrealized losses at this mark.
Now, here’s 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 been going down in recent days | Source: CryptoQuant
In the graph above, the “long-term resistance” zone is marked by the quantity that Bitcoin NUPL has seemed to follow historically. This area, located between the values of 0.31 and 0.38, is an important iteration for the cryptocurrency, as the failure here often meant the beginning of a pullback.
Coming from above, however, bullish iterations were also made on this zone, as the points marked with the green checkmarks in the chart display. A prominent example of such a successful iteration was back in July 2021, when BTC hit a local bottom and continued the second half of the 2021 bull run.
The example of bearish resistance seems to have come recently, as the indicator recently entered the zone but was rejected below. And with it, so is the price of the asset. It is not yet certain, but this rejection may have started an extended drawdown for the coin.
«Since the NUPL index has also formed a bearish Head & Shoulders (S&S) pattern, this could mean that Bitcoin could fall into the $24,000-$20,000 range,» the volume noted. «With the successful implementation of the S&S, the local upgrade of the NUPL index will also be broken.»
The Bitcoin NUPL has also shown interesting interactions with its annual MA in the past; sometimes the indicator found resistance or support at this level as well.
«The final limit to maintain Bitcoin’s bullishness is the 365-day MA, which serves as reliable long-term support,» the volume says. «To declare the above situation invalid, it is necessary to sustainably overcome long-term resistance!»
At the time of writing, Bitcoin is trading around $26,300, down 2% over the past week.
BTC has plunged recently | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com
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