Bitcoin Bearish Signal: NUPL gets rejection at long term resistance

On-chain data shows that Bitcoin Net Unrealized Profit and Loss (NUPL) recently found rejection at a long-term resistance zone.

Bitcoin NUPL has seen some decline in recent days.

As explained by an analyst at CryptoQuant Post, BTC NUPL metric failed to overcome a key resistance. “NUPL” is an indicator that tells us the degree of unrealized profit or loss that investors currently have.

What is meant by “unrealized” here is that the holders have accumulated profits/losses (due to the price being higher/lower than the coins they bought), but they don’t actually have to sell their BTC to set them in stone. Remaining to be sold.

When investors who are holding unrealized gains/losses end up selling, the gains/losses they were holding earlier are said to be “realized”.

When the value of NUPL is greater than zero, it means that the average investor is making a profit on their coins right now. On the other hand, the indicator being below this threshold suggests that the market is currently sitting on some losses.

A zero value of the metric naturally represents the break-even level, since the total amount of unrealized gains in the market equals unrealized losses at this mark.

Now, here is a chart that shows the trend in bitcoin NUPL, as well as its 365-day moving average (MA), over the past few years:

The value of the metric seems to have been going down in recent days | Source: CryptoQuant

In the graph above, volume marked the “long-term resistance” area that Bitcoin NUPL has followed historically. This area, which lies between the values ​​of 0.31 and 0.38, has been an important retest for the cryptocurrency, as a failure here often means the beginning of a drawdown.

Coming from above, however, there have also been bullish retests of this area, as indicated by the points marked by green checkmarks in the chart display. A prime example of such a successful retest was back in July 2021, when BTC hit a local bottom and proceeded with the second half of the 2021 bull run.

The bearish resistance pattern appears to have been formed recently, as the indicator recently entered the zone but was rejected to the downside. And with it, so has the property price. It is as yet uncertain, but this rejection may have triggered an extended drawdown for the coin.

“Given that the NUPL index has also formed a bearish head and shoulders (H&S) pattern, this could mean that bitcoin could drop to the $24,000–$20,000 range,” notes Quant. “With the successful implementation of H&S, the local uptrend of NUPL index will also be broken.”

Bitcoin NUPL has also shown interesting interactions with its annual MA in the past; The indicator has occasionally found resistance or support at this level as well.

“The final boundary for bitcoin to sustain its bullish momentum is the 365-day MA, which acts as reliable long-term support,” says Quant. “To declare the above scenario invalid, it is necessary to permanently overcome the long-term resistance!”

btc price

At the time of writing, bitcoin is trading around $26,300, down 2% over the past week.

BTC has plunged recently | Source: BTCUSD on TradingView

Featured images from iStock.com, Charts from TradingView.com, CryptoQuant.com