NUPL Signals Bearish Trend for Bitcoin on Long-Term Resistance

NUPL Signals Bearish Trend for Bitcoin on Long-Term Resistance


On-chain data shows that Bitcoin Net Unrealized Profit and Loss (NUPL) has recently been rejected at a long-term resistance zone, potentially leading to an extended drawdown for the coin and a bearish Head & Shoulders pattern.

On-chain data shows the Bitcoin (BTC) Net Unrealized Profit and Loss (NUPL) has found rejection at the longstanding resistance zone recently.

Bitcoin (BTC) NUPL Has Observed Several Decline In Recent Days

As stated by an analyst in a CryptoQuant post, the Bitcoin NUPL metric has failed to clear a major resistance. The “NUPL” is an indicator that tells us about the degree of unrealized profit or loss that’s as of now being held by the investors.

By “unrealized,” what’s meant here is the fact that the holders have accumulated profits/losses ( owing to the price being more/less than what they purchased the coins at), but they are is still to essentially sell their Bitcoin to set them in stone.

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And once such investors who are holding unrealized profits/losses do end up selling sooner or  thereafter, the profits/losses they were previously holding are stated to be “realized.”

And once the value of the NUPL is more than zero, it means the average investor is carrying a profit on their coins at this time. On the other hand, the indicator being below this threshold suggests the market as a whole is sitting on some loss currently.

The zero value of the metric itself naturally represents the break-even level, as the total amount of unrealized profits in the market equals the unrealized losses at this mark.

Now, here is a chart that shows the tendency in the Bitcoin (BTC) NUPL, likewise as its 365-day moving average (MA), over the last few years:

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In the over graph, the quant has marked the “ longstanding resistance” zone that the Bitcoin (BTC) NUPL has seemed to have historically followed. This area, which lies in betwixt the values of 0.31 and 0.38, has been an important retest for the digital currency, as failure here has often meant the start of a drawdown.

And once coming from over, on the other hand, there have likewise been positive  tendency retests of this zone, as the points marked by the green checkmarks in the chart display. A prominent example of such a successful retest was back in July 2021, when Bitcoin hit a local bottom and went ahead with the Second half of the 2021 bull run following it.

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The example of a bearish resistance seems to have formed just recently, as the indicator entered the zone recently but has been rejected downwards. And with it, so has the asset’s price. It’s uncertain is still, but this rejection may have started an extended drawdown for the coin.

“Given that the NUPL index has likewise formed a bearish Head & Shoulders (H&S) pattern, this could mean that Bitcoin (BTC) could fall into the $24,000-$20,000 range,” notes the quant. “With the successful implementation of the H&S, the local uptrend of the NUPL index will likewise be broken.”

The Bitcoin (BTC) NUPL has likewise shown interesting interactions with its yearly MA in the past; the indicator has sometimes found resistance or support at this level as well.

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“The last frontier for maintaining Bitcoin (BTC) bullishness is the 365-day MA, which acts as reliable longstanding support,” reveals the quant. “For the over scenario to be declared invalid, it is necessary to overcome longstanding resistance sustainably!”

Bitcoin Price

At the time of publication, Bitcoin (BTC) is trading around $26,300, down 2 percent in the last week.

Bitcoin Price Chart

Source

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