However, as the market seems to have found some stability around the $111,000 price zone, recent on-chain data has surfaced that paints a pessimistic picture concerning the asset’s short-term future.
XWIN Research started with an interesting comparison with previous years, where BTC experienced a psychological reset. According to these market experts, the difference between Bitcoin’s past resets and this current market crash is made apparent upon study of the Bitcoin Net Unrealized Profit/Loss (NUPL) metric.
For context, the Bitcoin NUPL metric tracks the overall profitability of BTC holders. It does so by calculating the difference between unrealized profits and losses. As of March 2020, when Bitcoin hit major lows, the NUPL levels fell below zero; the same can be observed in November 2022.
During these periods, it is clear that investors were holding BTC at net losses. Interestingly, these periods of market capitulation marked the beginnings of strong bull cycles that followed months of hopelessness. What’s notable about the current crash is that Bitcoin’s NUPL still stands at levels close to 0.5, showing that a significant amount of its holders are still in profit.
To shed light on the background mechanics behind Bitcoin’s slowed momentum, XWIN Research used results from the Bitcoin Long Liquidations metric, which functions to measure the total value of leveraged long positions forcibly closed due to wipeouts.
As would be expected, the long positions with too much leverage were wiped out in the previous market dump, but that’s not the only occurrence that took place. According to the crypto research institution, the Open Interest also declined alongside BTC’s price, helping to normalize derivatives metrics.
During the 2018-2019 and the 2022 market crashes, the initial dumps cleared leverage, but the real market bottoms came months after the leverage wipeouts in the market, during periods where panic and loss were dominant. Based on this historical data, the current setup seems to suggest that the market is at a pre-capitulation phase, with its stability being too fragile to be relied upon.
As it stands, the sentiment among investors remains intact. However, if the market should become more fearful, and the cryptocurrency’s NUPL falls to levels close to zero, we could see the start of a new and sustainable rally.
At press time, Bitcoin is valued at about $111,110, reflecting no significant 24-hour growth.
