Bitcoin Price Correction and the Battle Between Fear and Optimism
The price of Bitcoin has been correcting since it reached a local peak of $28,580 on October 2. The bears have pushed down the price to around $26,500. Now, the question is what’s next for the BTC price?
The Net Unrealized Profit/Loss (NUPL) indicator shows an ongoing battle between fear and optimism. Despite a bullish start to 2023 and an escape from the capitulation zone, Bitcoin price corrections keep returning to the fear area.
Understanding Net Unrealized Profit/Loss (NUPL)
NUPL is an on-chain metric that calculates the difference between relative unrealized profit and relative unrealized loss. It can also be calculated by subtracting realized market capitalization from total market capitalization and dividing the result by the latter.
The NUPL chart has five horizontal areas that represent different market psychology levels, ranging from red (capitalization level) to blue (euphoria and greed). The interpretation of intermediate areas depends on whether the chart crosses them during a bull or bear market.
Currently, Bitcoin NUPL is in the yellow, neutral area of optimism at 0.26. However, it is close to the orange level of fear, which begins after a drop below 0.25.
Short-Term Holders Capitulating with Signs of Reversal
The NUPL indicator for short-term holders (STH) reveals that new investors are still experiencing capitulation. This version of the chart considers only UTXOs younger than 155 days, reflecting unrealized profit/loss for new Bitcoin holders.
Most new investors are still underwater, although they experienced a period of relief and returned to the fear area earlier this year. Since mid-August, short-term holders have been facing continued capitulation.
However, an on-chain analyst named Checkmatey published a chart that suggests optimistic signals for STH. He pointed to the NUPL-related Profit/Loss Momentum indicator, which has turned green again. This could indicate a possible bounce in STH profit/loss momentum and lead to either the last profit-taking before a deep correction or the return of strength.
Bitcoin Low-Risk Index
Another analyst, Negentropic_, introduced the Bitcoin Risk Index. According to his data, the BTC price is currently in the low-risk blue area, oscillating around 0. This suggests that further deep downward movement is unlikely at this stage.
If the $26,000 level holds and the signals from NUPL are confirmed, the cryptocurrency market could soon experience a bullish rebound. However, if the $26,000 area is lost, a deeper correction is highly likely, leading NUPL back into the fear zone. Short-term holders will still be far from any profit.
Hot Take: The Battle Between Fear and Optimism Continues for Bitcoin
The price of Bitcoin has been correcting recently, causing fear and uncertainty among investors. The Net Unrealized Profit/Loss (NUPL) indicator shows that there is an ongoing battle between areas of fear and optimism in the market. While there are signs of optimism with NUPL in the yellow area, it is close to dropping into fear territory.
Short-term holders continue to experience capitulation, but there are also signs of a possible reversal. The Profit/Loss Momentum indicator has turned green again, suggesting a potential bounce in short-term holder profit/loss momentum.
The Bitcoin Risk Index indicates that the BTC price is currently in a low-risk zone, which may prevent further deep downward movement. However, if the $26,000 level is lost, a deeper correction is likely.
Overall, the battle between fear and optimism continues for Bitcoin. The market remains uncertain, and investors should closely monitor the NUPL indicator and other on-chain metrics to gauge the future direction of the cryptocurrency market.
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