Key Takeaways:
- Ki Young Ju, the CEO of CrytpoQuant says it is time to buy Bitcoin.
- The executive based his opinion on a spike in an on-chain metric named Net Unrealized Loss (NUL).
- The short-term technicals remain unconvinced.
YEREVAN (CoinChapter.com) – Ki Young Ju, the chief executive of crypto analytical platform CryptoQuant, presented on-chain data backtesting results on June 6. According to the tweet, the Net Unrealized Loss metric reached a two-year high, which prompted the executive to conclude it was time to buy the Bitcoin (BTC) dip, as the token grappled at $30,500 on Wednesday.
Young Ju also presented a graph of Net Unrealized Loss (NUL) and Bitcoin price, which seem to be in an inverse correlation.
Net Unrealized Loss (NUL) said 21.5% of Bitcoins (UTXOs) over total supply have unrealized losses. It reached a two-year high since the COVID crash in March 2020.
clarified the CEO.
Also read: Bitcoin might just crash all over again due to this eerie factor.
Furthermore, to understand the NUL, it is crucial to refer to its underlying metric, the UTXO. It is the amount of digital currency someone has left remaining after executing a cryptocurrency transaction.
Why is Bitcoin Net Unrealized Loss (NUL) important?
In detail, to compute the number of UTXOs in profit or loss, one needs to count all existing UTXOs whose price at creation time was lower or higher than the current price, respectively. Unrealized profit or loss takes the calculations a notch further.
Unrealized Profit/Loss considers the actual USD value by which a bitcoin is in gains or losses. In other words, each circulating BTC needs to be weighed by the difference between the current price and its realized price and sum up all Bitcoins in profit and loss, respectively.
Also read: JPMorgan chief issues “hurricane” warning; will Bitcoin stand the challenge?
Crypto analytical platform Glassnode published detailed research on the matter, calling the metric an essential determining factor in investor behavior.
[Net Realized Profit/Loss] (NUPL) represents different periods of the Bitcoin market cycles. Understanding the current NUPL value can help investors navigate through different stages of the market and identify periods of profit taking as well as efficient entry points.
concluded the Glassnode research.
Is it the right time to buy Bitcoin (BTC)?
As mentioned, CryptoQuant’s CEO concluded it was time to buy BTC “when investors are in loss” and partially based his opinion on the NUL’s two-year record.
I’m confident with on-chain data because our clients have traded using them, and are profitable even during this recession.
commented Young Ju.
However, other factors were at play as well. The executive pointed out that the bullish technical analysis for the coming year was “still valid.” Additionally, as CoinChapter previously reported, Bitcoin whales are already on the move, buying up the dip, and little fish have joined in as well.
According to Glassnode, the number of addresses holding over 1 BTC reached a new all-time high of nearly 850,000 on June 8.
Also read: Bitcoin whales’ BTC holdings hit one-year high as the crypto market recovers.
However, the short-term prediction based on technical analysis still points to a looming decline. The BTC/USD price action traded in a Bear Flag, pointing at more losses before the price picks up again.
Bear Flag on BTC/USD chart dampens short-term hopes
The Bear Flag typically occurs after a sharp downward move. It features a period of consolidation between two parallel trendlines that takes the price slightly higher before continuing on a bearish path. Moreover, the setup’s target drop equals the decline preceding the Flag, i.e., the flagpole.
According to CoinChapter’s previous prediction, Bitcoin’s short-term target price stood at approximately $20,600. The said target would constitute a 32% drop from BTC’s current price of $30,500 on June 8.
Also read: Bitcoin below $30K but a bull run might be imminent — here’s why.
Notably, the short-term bearish prediction does not cancel out the favorable on-chain metrics. As Young Ju asserted, the NUL data plays a significant role in determining long-term positions. Thus, keeping an eye on on-chain metrics, technicals, and other market data would provide a fuller understanding of the most profitable market entry and exit points.
However, it is essential to remember that Bitcoin also depends on broader market conditions. Additionally, crucial economic factors include the Federal Reserve’s quantitative tightening policy, legislative reforms, the ongoing war in Ukraine, skyrocketing commodities prices, etc.
