Data Shows People Have Been Taking Profits On Bitcoin – NRPL/NUPL

A data metric called NRPL (Net Realized Profit/Loss) shows that people have been taking profits – with the metric dropping negative for the first time since September 2020.

For example – if all the Bitcoin held were sold today, would the investors sell at a profit or a loss? Green indicates selling at a profit and red indicates selling at a loss.

This recent dip into the red is linked to those investors that took profits recently and we can take a look at another metric called NUPL to determine the Net Unrealised Profits/Loss.

We can see by the chart below that the NUPL metric is entering the red section indicating that investors may be getting greedy. Whenever we have seen this metric hit past the “greed” levels into “euphoria” levels it has aligned with five market tops in bitcoin’s price history.

Some traders are now seeing this as a bullish flag with the weak hands exiting Bitcoin where a new bottom price can be established. However there are arguments both ways with March being historically a bad month for Bitcoin, and Billions being invested still by Institutions.

By identifying which stage of the market cycle we are currently in, the NUPL indicator can help traders to set entries and identify exit points. For instance, a trader may want to go long on bitcoin when the NUPL indicator suggests that a move from the capitulation phase to the hope-fear phase is completed, and then to take profits once the market enters the belief-denial phase. 

The weakness of the NUPL indicator, as with all on-chain metrics, is that bitcoins transacted off-chain are not accounted for and therefore is an incomplete picture of profits and losses. Nevertheless, the NUPL indicator has been accurate since 2010 in identifying market tops, and to a lesser extent, bottoms.