On-Chain Analysis: MVRV and NUPL show Bitcoin is approaching a bear market
CoinCu will cover Bitcoin (BTC) on-chain metrics, more specifically Market Value to Realized Value (MVRV) and Net Unrealized Profit/Loss (NUPL).
MVRV is the ratio between the market cap and the actual capitalization of a coin. The MVRV Z-Score is a variation of the MVRV on-chain indicator. It uses the standard deviation to scale the specified scale. This is done to determine the difference between market capitalization and reality as a standard deviation.
On January 24, this indicator reached a value of 0.85. This is the first time the indicator has made such a low since September 2020, when the current bull cycle was just beginning. It is also in the critical range of 0.80 -1.20.
Historically, levels above this zone have been associated with an uptrend, while levels below are often associated with bear markets.
Therefore, for the bull cycle to remain intact, the MVRV must bounce and move above this zone. A drop below 0.8 would confirm that the long-term trend has turned bearish.
NUPL was created to determine the total profit or loss from a coin’s movement. To determine this, each coin in circulation is equated to the difference between the current price and the price when it was last moved.
Values above zero indicate that the realized gain is greater than the realized loss, while the opposite is true for values below zero.
In the previous market cycle, levels above 0.75 (in blue) were associated with the top. Conversely, values below 0.25 (red) usually signal a bottom.
In early January, NUPL fell below the 0.5 area. This is a bearish move as it has fallen below this level for the second time since July 2021 (black circle).
In previous market cycles, the NUPL has fallen below 0.5 only once after moving into the upper zone. Therefore, a second drop below 0.5 usually signals the end of a market uptrend (red circle).
However, it’s worth noting that the current cycle is the first NUPL cycle that hasn’t gone above 0.75. Therefore, when the current bull cycle ends, it will be the first time that NUPL has failed to break above the 0.75 level. If not, it will be the first time the indicator falls below 0.5 twice before regaining this level.
Therefore, the next move is very important to determine the future trend. A further recovery from 0.5 would do much to confirm that the long-term bias remains bullish, while a dip towards 0.25 would confirm that the long-term bias is bearish.
Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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