Last week, BTC broke through the 64,000 mark, coming very close to the previous bull market high of 69,000. At the same time, prices of newly issued assets in the market have been continuously pushed higher, and a bubble is forming and expanding. For players who have been accumulating BTC for the past two years, they are starting to think about one question: what stage is BTC currently in? When should they take profits and exit?
Glassnode provides a wealth of BTC analysis indicators, from which we can select two indicators, Net Unrealized Profit/Loss (NUPL) and Long/Short-Term Holder Threshold, to assess the market’s current position.
Net Unrealized Profit/Loss (NUPL) attempts to answer the question of how much of the circulating supply of Bitcoin is in profit or loss at any given point in time, and to what extent.
NUPL describes the overall profitability and loss of BTC by calculating the difference between the current market cap and the realized cap, using the formula (Market Cap – Realized Cap) / Market Cap. Realized cap is the cumulative sum of prices at which Bitcoin was last moved. Subtracting the realized cap from the current market cap gives the unrealized cap. If the unrealized cap is negative, it indicates an overall loss in the market, while a positive unrealized cap indicates an overall profit. Dividing the unrealized profit or loss by the current market cap gives the specific value of NUPL. The smaller the profit and the larger the loss, the closer it is to the bottom, while the larger the profit and the smaller the loss, the closer it is to the top.
NUPL is divided into 5 zones. The red zone is below 0 and represents a loss zone, which is a buying zone. The orange zone is between 0 and 0.25, representing a slight profit zone. The yellow zone is between 0.25 and 0.5. The green zone is between 0.5 and 0.75. The blue zone is above 0.75. Generally, below 0.25 is considered a good buying zone, while above 0.5 may indicate the start of a bull market.
By observing history, we can see that NUPL has been a good indicator for identifying bottom areas. In the second half of 2022, NUPL remained below 0. For identifying top areas, NUPL has been less accurate. In the 2017 bull market, it briefly touched the blue zone, while in the 2021 bull market, it remained in the green zone throughout. This increases the difficulty of judging the top area.
In terms of our current position, from early December to early January, NUPL was in the green zone. It then dropped into the yellow zone for nearly a month before re-entering the green zone on February 7th. Currently, it is the second time in this cycle that it has entered the green zone, lasting for nearly a month.
Looking at history, during the period from December 2016 to January 2018, NUPL was mostly in the green zone. During this time, BTC rose from $780 to $17,000, an increase of about 21 times.
From October 2020 to May 2021, as well as from August 2021 to December 2021, NUPL was also in the green zone. During the period from October 2020 to May 2021, BTC rose from $13,000 to $63,000, an increase of about 4.8 times.
In terms of duration, the green zone lasted for more than 10 months.
It should be noted that the start of the previous two bull markets coincided with the halving event. However, looking at this year, BTC was already close to a new high before the halving, and NUPL has been in the green zone for over 2 months. This time, it is not as simple as following the trend after the halving.
In the previous two bull markets, the halving had a significant impact on BTC’s supply, causing a substantial reduction and increasing mining costs, leading to a supply shortage and price increase. In this bull market, most of the BTC has already entered circulation, reducing the impact of the halving on the supply. At this time, the approval of BTC ETFs has brought in a large number of buyers, also causing a supply shortage and triggering the market to start earlier. The BTC market will be more influenced by US monetary policy and the US stock market.
Long/Short-Term Holder Threshold examines the changes in long-term and short-term holders of BTC. Long-term holders are BTC that has not moved for more than 155 days in the same address, while short-term holders are BTC that has been moved within 155 days in the same address. The changes in this indicator can show when long-term holders are accumulating or selling BTC.
Currently, the total amount of long-term held BTC is about 14.5 million, while the total amount of short-term held BTC is about 2.87 million, indicating that about 83% of BTC is in long-term holding.
By observing history, we can see that in January 2017, when BTC reached $900, close to the high point of the 2013 bull market ($1,000), long-term holders began selling. The selling trend continued until early 2018. Correspondingly, the number of short-term holders increased significantly.
Throughout 2018, BTC was in a downtrend, and long-term holders continued to accumulate BTC during this period.
In April 2019, after BTC broke through $5,000, long-term holders started selling. The accumulation trend resumed from August 2019 and continued until 2020.
In October 2020, after BTC broke through $11,000, long-term holders started selling. The selling trend continued until April 2021.
In November 2021 and June 2022, long-term holders experienced brief declines, but then continued to grow.
In early December 2023, long-term holders started selling. The number of long-term held BTC decreased from a peak of 14.98 million to 14.5 million, a decrease of about 500,000. Currently, this trend is still ongoing.
BTC’s market dominance (BTC.D) is currently at 53.87% of the total cryptocurrency market capitalization.
By observing historical data, we can see that BTC’s market dominance increases during bear markets and decreases during bull markets. The low points of the 2017 and 2021 bull markets were around 40%.
In each bear market, BTC’s market dominance gradually decreases, forming a trend line. The current dominance is still within the range of this trend line. Since the beginning of this bear market, the highest dominance was around 54%.
At the peak of a bull market, BTC’s market dominance should decrease to around 40%. Currently, there is no clear downward trend in BTC’s market dominance.
In conclusion, when NUPL is above 0.5, BTC holding addresses have realized profits of more than 50%. During the 2017 and 2021 bull markets, the duration of NUPL being above 0.5 was 14 months and 11 months, respectively, and occurred after the halving event. This year, it has already entered a generally profitable zone for over 2 months before the halving, indicating a difference from previous trends. It may be more influenced by US monetary policy and the US stock market, such as the timing of interest rate cuts, which could trigger a market correction.
Looking at the Long/Short-Term Holder Threshold, long-term holders are currently at historical highs. However, starting from December 2023, long-term holders have gradually started to sell BTC. This behavior is similar to that of 2017 and 2020. Long-term holders will continue to sell BTC between the previous bull market high and the current bull market high.
From the BTC market dominance perspective, the current BTC market dominance is still at a relatively high level, and there is no clear downward trend yet, indicating that the altcoin market’s main uptrend has not started.
Overall, BTC is in the early stage of the main uptrend, and the altcoin market’s main uptrend has not yet started.
