Crypto analyst Onchained recently provided valuable insights into one important benchmark which can be measured the future trajectory of Bitcoin. The analyst suggested there is no cause for concern at the moment, but highlighted what to look for to know the right time to exit the market.
Bitcoin short-term holders NUPL turns negative
In a blog afterthe analyst noted that the NUPL (Net Unrealized Profit/Loss) for Bitcoin’s short-term holders recently turned negative. The analyst added that this indicates fear among this category of investors, which is very likely given Bitcoin’s current price action. The last time this trend occurred was shortly after Spot Bitcoin ETFs were approvedwith Bitcoin falling from $49,000 to $38,000 after that incident.
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Source: CryptoQuant
While the NUPL turning red again for short-term holders indicates that a significant price decline may be in store, the analyst noted that this price level could simply represent a significant support line. The real cause for concern could be when the NUPL for medium term holders also becomes negative. “It could indicate widespread market fear and serve as a crucial risk management indicator for market exit,” the analyst claimed.
It is worth noting that the short-term holder’s NUPL is negative meaning that he is currently seeing an unrealized loss on his investments. This could trigger a wave of sell-off among these investors, mainly out of fear of it Bitcoin’s price could fall further. However, based on the analyst’s analysis, this could not significantly reduce the price of Bitcoin.
Instead, market speculators should be more concerned about the PUNL of medium-term holders (those who have held Bitcoin for three to six months). If the PUNL also turns negative, it will “suggest widespread pessimism or negative sentiment.” This could lead to enormous selling pressure on the price of Bitcoin, as this category of investors could also lose their holdings out of fear.
The worst may already be over
Crypto analyst Ali Martinez did previously shared a similar analysis to that of Onchained, noting that the realized price of Bitcoin Short-Term Holder (STH) was $59,800. The analyst warned at the time that a Bitcoin decline below this level could trigger “notable Bitcoin price corrections.” Following his prediction, Bitcoin fell below $59,800and fell to $57,000.
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However, the flagship crypto has since recovered nicely above $60,000. While Bitcoin is still showing signs of a bearish outlook, its rapid recovery above $60,000 suggests the worst could be over. catalyst to effect a continuation of its bull run.
Arthur Hayes, co-founder and former CEO of BitMEX, also confirmed this belief, noting that Bitcoin has already found its local bottom. However, he predicted that Bitcoin will likely have a “range-bound price action” between $60,000 and $70,000 until August.
BTC bulls push price above $63,000 | Source: BTCUSD on Tradingview.com
Featured image of Kiplinger, chart from Tradingview.com