Today, I will analyze the relationship between NUPL and price, and discuss how we can take action.
NUPL (Net Unrealized Profit/Loss) is calculated by comparing market value and realized value. Bitcoins are valued at their purchase price.
Now, I will explain how we should use it during bull and bear trends, and show how to build a strategy using the EMA.
When our NUPL value falls below 0, the last bitcoins sent, according to the market value, are considered expensive, signaling potential local bottoms. At this point, some are selling at a loss while others are in surrender mode. When the surrender phase ends, selling decreases, and the price stabilizes at a certain bottom point.
When the NUPL value rises above 0, it indicates that the market value has increased and exceeds the unrealized value.
Potential support and resistance levels here are psychological. Each quarter crossing can psychologically initiate a rise or pullback.
In bullish trends, NUPL usually hovers between 0.5 and 0.75.
The bull market typically starts to end when NUPL reaches 0.70 and above.
Since we are currently in a bull market, price increases are likely as long as NUPL stays between 0.5 and 0.75. Pullbacks are buying opportunities for us. When we see the price increase together with NUPL, it indicates that selling pressure has come and will continue. We can think that the market is completely heated up, and when we enter the greed phase at 0.75, we should be cautious as deep corrections will likely occur.
I have added the EMA 121 here, which shows us the areas where momentum will gain and lose. When we look at the NUPL value, we see that EMA 121 often acts as support and resistance. It indicates that in some cases, manipulation occurs, and we can take a position when it moves back above or below the EMA.
In some areas, deviations occur, showing us which way to turn positions when momentum is gained or lost again.
The BULL market continues. The excess has not yet arrived.
Written by XBTManager