Bitcoin (BTC) could be in the early stages of a major new rally, according to significant accounts on October 27th. The dominant cryptocurrency entered the “confidence zone” that historically marked the start of explosive groups.
According to Glassnode, the last time the unrealized net profit / loss (NUPL) reached the confidence zone was in June 2019. The following month, Bitcoin grew from around $ 7,500 to $ 13,868 by more than 80%.
What is NUPL and why does Bitcoin’s bull run mean?
The NUPL account basically measures the number of Bitcoin holders who have a profit or loss. If the account increases, this means that more investors are making a profit from the moment they buy BTC.
Glassnode researchers calculate NUPL by estimating the price of bitcoins when entering a new address.
Since the buyer needs BTC at the new address, newly created addresses usually mean newly acquired BTC. The researchers explained:
“The number of UTXOs in profit / loss is calculated in a simple way: We simply count all existing UTXOs whose price at the time of construction was below or above the current price, respectively.”
Currently, more than 50% of Bitcoin’s market capitalization is unrealized profits. This means that the vast majority of BTC holders and investors are making a profit.
While the account can be interpreted negatively as investors may start selling, historically, the NUPL was supposed to rise much higher to indicate a peak. Glassnode writes:
Bitcoin investor sentiment: The unrealized net profit / loss (NUPL) was in the “confidence” zone last week. Currently, more than 50% of BTC’s market value is unrealized gain – this level has not been observed since August 2019. ‘
Throughout 2017, Bitcoin has lived in the faith area longer than it did in the 2019 Rally. There is a possibility that a similar extended accumulation phase will occur in 2021 due to the cycle after the halving.
Analysts often link the 2017 high to a half-cycle. In July 2016, Bitcoin cut bonuses in half for the second time. Since the halving determines the rate at which the new BTC will recover, it directly affects supply. A year after cutting it in half, BTC is starting to rise.
The last cut in half happened in May 2020. If a similar picture is presented, BTC could continue to rally throughout 2020 through the second half of 2021.
What analysts are saying about Bitcoin’s price trend in the near term
In the short term, analysts and traders expect the bitcoin price to enter a healthy consolidation phase.
Santiment researchers said chain measurements and social signals are showing signs, possibly due to the bitcoin’s overheating. They said:
This weekend is dedicated to the analysis of the stability of BTC $ above $ 13,000. From now on, our network and social accounts are showing signs of more than encouraging. ”
Unlike the bull run of 2017, Bitcoin’s rally today has been much more resilient. It has created several major support and resistance levels, reducing the possibility of a major correction.