The NUPL metric assesses whether, on average, a cohort of investors currently holds unrealized gains or losses. It shows the value of their investment in paper form – the unrealized gain or loss through sales.

NUPL Trend Analysis:

- Volatility and Response Time: The red line is very responsive to Bitcoin price movements, indicating that short-term traders react quickly to price changes. The NUPL of this cohort showed sharp increases and decreases, indicating their sensitivity to current market conditions.

- Trend Relative to Price: During periods of rapid price increases, traders' NUPL often spikes, indicating unrealized profits are being made. Conversely, during price declines, their NUPL quickly turns negative, indicating unrealized losses.

- Zero Line Crossing: The frequency of zero line crossing highlights the trader's high turnover and active position management. This behavior reflects a risky approach where traders seek to capitalize on short-term market movements.

Composite Trends and Market Sentiment

- Market Sentiment Indicator: Periods where both group NUPL lines are above zero can indicate strong market optimism, while periods below zero indicate pessimism or broad negative sentiment.

Implications for Future Price Movements:

From the chart, it appears that NUPL for traders has recently fallen into negative territory, signaling an increase in fear within this cohort. The last instance of this trend was on January 24, after the approval of the spot ETF, when Bitcoin price sharply fell from $49,000 to $38,000. This price level may represent a significant support line. However, if the NUPL for medium-term holders also turns negative, this could indicate broad market fear and serve as an important risk management indicator for exiting the market.