Bitcoin’s NUPL indicator shows a battle between fear and optimism zones. Despite the recent capitulation, short-term BTC holders are showing signs of reversal.
Bitcoin price has been correcting since reaching a local peak of $28,580 on October 2. Since then, the bears have managed to push the price of the largest cryptocurrency down to the $26,500 area. What’s next for BTC price?
At the same time, the well-known Net Unrealized Profit/Loss (NUPL) indicator shows the ongoing battle between areas of fear and optimism. Despite a bullish start to 2023 and an exit from the capitulation zone, Bitcoin price corrections continue to return to the fear zone.
Will the Bitcoin Risk Index, which has currently hit its lows, finally keep the cryptocurrency market in the optimism zone and start a new bull market?
NUPL between Fear and Optimism
Net Unrealized Profit/Loss (NUPL) is an on-chain metric that calculates the difference between relative unrealized profit and relative unrealized loss. Another way to calculate this ratio is to subtract the realized market capitalization from the total market capitalization and divide the result by the latter.
The NUPL chart contains five horizontal areas, which are interpreted from the perspective of market psychology: from the red level of capitalization to the blue area of euphoria and greed. Intermediate areas have both bullish and bearish interpretations depending on whether the chart crosses the area during a bull or bear market.
Currently, Bitcoin’s NUPL is in the fairly neutral yellow zone of optimism at 0.26. At the same time, the indicator is close to the orange fear level, which begins after a drop below 0.25. The optimism area is the highest-level Bitcoin’s NUPL has been at since early 2023.
In mid-January, the indicator was consolidating at the lowest capitulation level, only to turn bullish as the Cryptocurrencies recovered quickly. However, the specter of a deeper correction and a test of the $20,000 area could still send NUPL deep back into fear territory.
Short-Term Holders Continue to Capitulate, But Signs of Reversal Arise
If the same indicator is analyzed for short-term holders (STH), it is evident that new investors are still experiencing capitulation.
The NUPL for STHs takes into account only those UTXOs that are less than 155 days old. In other words, it calculates unrealized gains/losses for new Bitcoin holders.
This version of the chart reveals that most new investors are still posting losses. The beginning of the year had brought them a period of relief and a return to the fear zone. What’s more, the short-term NUPL was even in the optimism zone for a while (March 20). However, since mid-August, short-term holders have seen continued capitulation
Despite this, well-known on-chain analyst @_Checkmatey_ published an X chart that may contain optimistic signals. He pointed out the NUPL indicator for STHs:
“The bears took the negative situation with the liquidation from $29,000 to $26,000. However, they were unable to lower it. Despite the significant losses the market is suffering (the most bearish the market has been since FTX).”
He adds that the indicator has turned green again, indicating a possible rebound in the STH (short-term holders) profit and loss momentum. Therefore, the analyst concludes, this could lead to two possible scenarios: the last profit-taking before a deep correction or the return of strength. He adds that personally – in the context of the macro market – he leans towards the latter scenario.
By Audy Castaneda
