The NUPL index shows that many cryptocurrencies are profitable, posing a risk of profit-taking by investors.
The NUPL index often peaks at high points of the cryptocurrency market cycle, reflecting the profit trends and profit-taking risks of investors during price fluctuations.
MAIN CONTENT
A NUPL index greater than 0 signals that many cryptocurrencies are profitable.
Market cycle peaks are often associated with NUPL peaks historically.
The current cycle is more stable due to cash flow from ETFs and institutions in the United States.
What is the NUPL index and what does it reflect in the cryptocurrency market?
The NUPL (Net Unrealized Profit and Loss) index represents the unrealized profits or losses of investors when the current value exceeds or falls below the average purchase price. When NUPL is greater than 0, most investors are making profits.
In reality, the positive value of NUPL signals that the market is in a state where many are profiting, creating profit-taking pressure that can cause price volatility. This index helps analyze the risk of price corrections and identify the peak points of the cryptocurrency price cycle.
Why do NUPL peaks coincide with cryptocurrency market cycle peaks?
Historical analysis results show that cryptocurrency market cycle peaks often coincide with peaks of the NUPL index due to unrealized profits reaching high levels. For example, this coincidence occurred in 2017 and twice in 2021.
Reaching a NUPL peak indicates that many investors have significant profits, leading to increased profit-taking activity, which in turn creates correction or reversal points in the market. The current cycle may be forming a third peak based on a similar pattern.
The cryptocurrency market is currently more stable thanks to institutional cash flow from ETFs in the United States, reducing large fluctuations like before.
Yonsei_dent, CryptoQuant analyst, August 2024
What is different about the current cryptocurrency market cycle compared to previous cycles?
Instead of being highly volatile like previous peaks, the current cycle occurs more stably and is primarily driven by cash flow from ETFs and institutional investment funds in the United States.
Price increases in the next bull markets are becoming lower but more sustainable, indicating that the market can extend the bullish phase without exploding quickly as before. This reflects the growing maturity and involvement of institutional investors.
The current cryptocurrency cycle is more stable, minimizing sudden fluctuations thanks to strong institutional capital participation.
Yonsei_dent, CryptoQuant analyst, August 2024
Frequently asked questions
Is the NUPL index accurate for predicting market peaks?
NUPL is a useful index reflecting unrealized profits but needs to be combined with other factors to accurately forecast market peaks.
Why is the current cycle more stable than previous ones?
Cash flow from ETFs and institutions is a major reason for the market being less volatile and more stable.
What NUPL index value signals profit-taking?
When NUPL exceeds the 0 mark, many investors are profitable, leading to a tendency to take profits that adjusts prices.
How long is the next cryptocurrency cycle expected to last?
The current bullish cycle tends to last longer, but the exact duration depends on market cash flow and macroeconomic factors.
How to effectively use the NUPL index in trading?
NUPL should be used in combination with technical indicators and fundamental analysis for optimal trading decisions.
Source: https://tintucbitcoin.com/chi-bao-cryptoquant-du-bao-dinh-loi-nhuan/
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