The price of Bitcoin has been on a corrective path since reaching a local peak of $28,580 on October 2. As of now, it has retreated to around the $26,500 mark, leaving many investors wondering about the cryptocurrency’s next move. The Bitcoin market is currently characterized by a tug-of-war between fear and optimism, as indicated by the Net Unrealized Profit/Loss (NUPL) metric.
Understanding NUPL
NUPL is an on-chain metric that assesses the difference between unrealized profit and unrealized loss relative to Bitcoin’s total market capitalization. The NUPL chart is divided into five horizontal areas that correspond to different psychological states in the market: from red (capitulation) to blue (euphoria and greed).
As of the latest data, Bitcoin’s NUPL is in the yellow, relatively neutral area of optimism, with a value of 0.26. However, it is precariously close to the orange level of fear, which kicks in after dropping below 0.25. This area of optimism is the highest level the NUPL has reached since early 2023. In contrast, in mid-January, the metric was hovering at the lowest level of capitulation but quickly turned optimistic as the cryptocurrency market recovered.
Short-Term Holders and Capitulation
A closer look at NUPL for short-term holders (STH) reveals that new investors are still experiencing capitulation. STH NUPL only considers unrealized profit/loss for Bitcoin holdings younger than 155 days, effectively gauging the sentiment of newer investors. Despite a brief period of optimism earlier in the year (around March 20), short-term holders have continued to experience capitulation since mid-August.
However, there are signals of a potential reversal. An on-chain analyst, @Checkmatey, pointed to the NUPL-related Profit/Loss Momentum indicator for STH. While bears had driven this indicator into negative territory during a sell-off from $29k to $26k, they were unable to push it lower, despite significant market losses. The indicator has turned green again, signaling a potential bounce in STH profit/loss momentum, which could lead to either a last bout of profit-taking before a deep correction or a resurgence in strength.
Bitcoin Low-Risk Index
Another on-chain analyst, @Negentropic_, introduced the Bitcoin Risk Index, which currently places BTC in the blue zone of low risk. This suggests that deeper downward movements are unlikely at this stage. The recent price declines have not pushed Bitcoin below $26,000, and if this level holds, the cryptocurrency market may be poised for a bullish rebound.
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However, if Bitcoin’s price falls below $26,000, a more substantial correction is probable, and the NUPL metric could swing back into the fear zone. Short-term holders, in this scenario, would still be far from making profits.
In conclusion, Bitcoin’s price is currently in a delicate balance between optimism and fear. The movements in both long-term and short-term holders provide mixed signals, and the outcome of this battle could significantly impact the direction of the cryptocurrency market. Traders and investors are advised to keep a close eye on these metrics and market developments to make informed decisions.
