NUPL ratio shows why long-term holders are better market top indicators

Entity-adjusted
Bitcoin
metrics
provide
a
refined
view
of
market
sentiment
by
filtering
out
non-economic
transactions.
This
is
especially
important
when
analyzing
net
unrealized
profit
and
loss,
such
as
the
LTH-NUPL
and
STH-NUPL.

Non-entity-adjusted
metrics
can
show
skewed,
unclear,
or
incorrect
data
because
they
include
all
transactions,
even
internal
transfers
within
the
same
entity.
These
“in-house”
transactions
do
not
represent
real
economic
activity
but
can
artificially
inflate
or
deflate
the
apparent
level
of
unrealized
profit
or
loss.

For
instance,
large
internal
transfers
might
create
the
illusion
of
increased
market
activity
or
profit-taking,
resulting
in
false
interpretations
of
market
tops
or
bottoms
and
ultimately
causing
inaccurate
market
predictions.

Entity-adjusted
LTH-NUPL
is
an
advanced
metric
that
considers
the
actual
economic
activity
of
long-term
holders
by
excluding
these
“in-house”
transactions.
This
helps
filter
out
activity
from
large
institutional
players
that
have
become
ubiquitous
in
the
industry
since
the
launch
of
spot
Bitcoin
ETFs.

Historically,
LTH-NUPL
has
been
a
reliable
indicator
of
market
sentiment,
particularly
in
identifying
market
tops
and
bottoms. When
the
LTH-NUPL
crosses
above
0.7,
it
typically
signals
the
beginning
of
a
euphoria
or
greed
phase
in
the
market.
This
phase
often
correlates
with
market
tops
as
long-term
holders
realize
significant
unrealized
profits.
Conversely,
values
between
0.5
and
0.7
indicate
a
belief
or
denial
phase,
depending
on
the
price
direction.

In
2024,
LTH-NUPL
has
consistently
remained
above
0.5,
suggesting
a
strong
belief
in
the
market’s
upward
trend
among
long-term
holders.
The
metric
briefly
crossed
into
the
greed
phase
from
May
11
to
May
13,
showing
a
short-lived
euphoria
as
Bitcoin
reached
its
new
all-time
high.

Since
July,
LTH-NUPL
has
been
trending
upwards
with
significant
volatility,
reaching
0.70
on
July
27
before
slightly
decreasing
to
0.66
by
July
31.

This
upward
trend
in
LTH-NUPL
reflects
the
confidence
of
long-term
holders
in
the
ongoing
market
rally
despite
the
occasional
volatility.
The
metric’s
resilience
above
0.5
throughout
the
year
shows
the
cohort’s
sustained
belief.

Entity-adjusted
STH-NUPL,
on
the
other
hand,
measures
the
net
unrealized
profit
or
loss
of
short-term
holders,
defined
as
entities
holding
Bitcoin
for
less
than
155
days.
Historically,
STH-NUPL
has
been
less
effective
in
predicting
market
tops
and
bottoms
than
LTH-NUPL.

During
Bitcoin’s
bull
run
in
December
2017,
STH-NUPL
briefly
entered
the
belief/denial
phase.
However,
it
has
mostly
ranged
between
0
and
0.24,
indicating
a
state
of
hope
or
fear
among
short-term
holders,
with
extreme
volatility
corresponding
to
price
movements.

This
year,
STH-NUPL
saw
as
much
volatility
as
its
LTH
counterpart.
The
ratio
entered
the
optimism
category
above
0.24
in
March,
only
to
drop
into
capitulation
territory
below
0
in
late
June
and
mid-July.
This
drop
reflects
the
market’s
severe
correction
and
the
ensuing
panic
among
short-term
holders.

Since
July
7,
STH-NUPL
has
been
trending
upwards,
breaking
above
0
and
entering
the
hope
category
on
July
15.
As
of
July
31,
the
metric
stands
at
0.033,
a
slight
decrease
from
a
recent
high
of
0.081
on
July
27.
This
upward
trend
indicates
a
gradual
recovery
in
market
sentiment
among
short-term
holders,
though
it
remains
cautious
and
uncertain.

The
disparity
between
LTH-NUPL
and
STH-NUPL
highlights
long-term
and
short-term
holders’
contrasting
behaviors
and
sentiments.
LTH-NUPL’s
higher
and
more
stable
values
suggest
a
stronger
and
more
consistent
belief
in
the
market’s
long-term
potential.
Having
held
their
assets
through
various
market
cycles,
long-term
holders
exhibit
greater
resilience
and
confidence,
contributing
to
the
metric’s
effectiveness
in
predicting
market
tops
and
bottoms.

In
contrast,
STH-NUPL’s
lower
values
and
higher
volatility
reflect
the
short-term
holders’
sensitivity
to
market
fluctuations.
Short-term
holders
are
more
likely
to
react
to
immediate
price
movements,
leading
to
frequent
shifts
between
hope,
fear,
and
capitulation
phases.
This
reactive
behavior
makes
STH-NUPL
a
less
reliable
indicator
of
long-term
market
trends.

LTH-NUPL’s
ability
to
signal
market
tops
is
rooted
in
the
behavior
of
long-term
holders
during
euphoric
phases.
When
LTH-NUPL
exceeds
0.7,
it
indicates
that
long-term
holders
are
sitting
on
substantial
unrealized
profits.
Historically,
this
has
led
to
profit-taking
activities,
subsequently
triggering
market
corrections
or
tops.

ADVERTISEMENT

The
post
NUPL
ratio
shows
why
long-term
holders
are
better
market
top
indicators
appeared
first
on
CryptoSlate.

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