The Bitcoin NUPL indicator’s value has dropped sharply in recent months, which may indicate the beginning of a bear market.
Bitcoin NUPL Value Dropped to 32.5% After the Crash
According to the latest weekly report from Glassnode, the BTC NUPL’s recent trend may suggest that the early bear market is now beginning.
The “Net Unrealized Profit and Loss” (or NUPL in short) is an on-chain indicator that measures the difference between the relative unrealized profit and the relative unrealized loss.
NUPL = (Market Cap – Realized Cap) / Market Cap
This metric, which is simple to understand, tells us whether Bitcoin as a market is in profit or loss.
It works by looking at the coins on the chain, and checking if the current price of each one is lower or greater than that at which it was originally bought.
The NUPL value above zero means that Bitcoin’s overall network is profiting. Conversely, negative NUPL values indicate investors are in average loss.
The historical trend is that the less the indicator deviates from zero, the closer price was to a top (or bottom) depending on the current metric.
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Here’s a chart showing the evolution of Bitcoin NUPL throughout the history.
Source: The Glassnode Week Onchain - Week 4, 2022| Source: The Glassnode Week Onchain - Week 4, 2022
The above graph clearly shows that the Bitcoin NUPL’s value has fallen sharply in recent months to 0.325. This means that currently 32.5% of the crypto’s market cap is being held as unrealized profit.
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The indicator’s current value seems to be in a region that has historically signaled an early bear market trend, as the colors in the chart highlight.
Over the last year, there has been a trend of bearish divergence. This could be the start of a new bear-market, according to all NUPL signals.
It is interesting to note that the same values existed after the May 2021 crash. In a way, the bear market started after that crash, although it lasted only for a few short months.
BTC price
At the time of writing, Bitcoin’s price floats around $36.4k, down 12% in the last seven days. The crypto’s value has dropped 28% over the last month.
The chart below shows how Bitcoin’s prices have changed over the course of the last five business days.
BTC price fell to $33k yesterday but it has recovered above $36k since. Source: BTCUSD tradingview| Source: BTCUSD on TradingView
Unsplash.com featured image, Charts from TradingView.com and Glassnode.com charts