Bitcoin NUPL Metric Signals Start Of Early Bear Period

Bitcoin NUPL indicator has sharply dropped in value recently, a trend that may signal the start of the early bear market period.

After The Crash, Bitcoin NUPL Value Has Declined To 32.5%

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

In simpler terms, what this metric tells us is whether the Bitcoin market as a whole is currently in a state of profit or of loss.

The indicator works by looking at each coin on the chain and checking whether its current price is lower or higher than the price it was bought at.

When the NUPL value is above zero, it means the overall Bitcoin network is currently in profit. On the other hand, negative values imply investors are, on average, in loss at the moment.

Historically, the more the indicator has deviated from zero, the closer the price has been to a top or a bottom (depending on which way of zero the metric currently points).

Related Reading | Following Crash, Bitcoin Open Interest Declines To Sept 2021 Levels

Now, here is a chart that highlights the trend in the Bitcoin NUPL over the history of the coin:

Looks like the metric's value has sharply declined recently | Source: The Glassnode Week Onchain - Week 4, 2022

As the above graph shows, the Bitcoin NUPL has sharply declined recently, and its value is now 0.325. This means that currently 32.5% of the crypto’s market cap is being held as unrealized profit.

Related Reading | Has Bitcoin Reached Its Bottom? Analyst Says It Still Has A Long Way To Go

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.

The trend over the past year has also been that of a bearish divergence. Therefore all NUPL signs are that this may now be the beginning of a new bear market.

An interesting fact is that similar values were also there following the May 2021 crash. Thus in a sense, a bear market also started then, but it only lasted for a few months.

BTC Price

At the time of writing, Bitcoin’s price floats around $36.4k, down 12% in the last seven days. Over the past month, the crypto has lost 28% in value.

The below chart shows the trend in the price of BTC over the last five days.

BTC's price plunged to $33k yesterday, but has since recovered back above $36k | Source: BTCUSD on TradingView Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com