NUPL: Net Unrealized Profit and Loss On-Chain Indicator
Net Unrealized Profit and Loss (NUPL) is a metric calculated as the difference between market capitalization and realized value divided by market capitalization. NUPL aims to show the profit or loss position of investors in Bitcoin and other crypto assets.
Net Unrealized Profit and Loss (NUPL) is the difference between Market Cap and Realized Value.
How to calculate?
The NUPL formula is the difference between market capitalization and realized value divided by market capitalization.
Positive NUPL (> 0): In this situation, there are more coins or traders making a profit than those making a loss. A positive NUPL can indicate that the market capitalization exceeds the realized value and that the traded value is higher than the on-chain expected value. High positive NUPL values may indicate more selling pressure due to the large difference between market capitalization and realized value.
Negative NUPL (< 0): In this situation, there are more loss-making coins or traders than profit-makers. A negative NUPL indicates that the realized value exceeds the market capitalization and the traded value is lower than the on-chain expected value. Lower negative NUPL values may indicate a higher motivation to buy due to the large difference between realized value and market capitalization.
Trends of NUPL
Uptrend: If NUPL is increasing, this indicates more selling pressure. More coins or investors are moving into a profitable zone and are motivated to realize their profits, which leads to increased selling pressure. It also indicates that the market capitalization exceeds the realized value, making it profitable to sell coins on the market.
Downtrend: If NUPL is decreasing, this indicates less selling pressure. More coins or investors are moving into a loss position and there is less motivation to realize losses, which leads to less selling pressure. It also indicates that the realized value exceeds the market cap, making it less profitable to sell coins on the market.
Critical Levels for NUPL
Upturn Period:
0 level and above: This is when NUPL exits the "Capitulation" period and enters the "Hope-Fear" zone. There are more investors in profit than in loss. Any new zone above this level can work as resistance in the first phase.
0.25 - 0.50 level range: This is where NUPL enters the "Optimism-Anxiety" area. It shows that the level of profitability in the Bitcoin network has increased further. When historical data is analyzed, it is seen that this profitability does not result in a big sale.
0.50-0.65 level range: This is the area where NUPL enters the "Belief-Denial" area. The 0.50 level indicates that half of Bitcoin's market capitalization is in profit. An increase in this value may mean that selling pressure will increase.
0.65 level: This means that the unrealized profit rate on the Bitcoin network continues to increase. Values at this level and above can be seen as a selling opportunity for investors.
Above the 0.75 level: This is where NUPL enters the "Euphoria-Greed" zone. A large portion of Bitcoins on the blockchain network are in profit, and investors may now want to take profit realizations. Historical data shows that levels of 0.75 and above work as the peak of a bull market, after which a period of decline may begin.
Downturn Period:
0.75 level and below: This is the area where NUPL breaks out of the "Euphoria-Greed" zone. It means that investors are making profit realizations. When historical data is analyzed, it may be unlikely to revisit this zone in the short term and a new bearish period may have begun. It is possible that the 0.50 level may work as support in the first stage.
0.50 level: The profitability of the Bitcoin network continues to decline. Currently, half of the market capitalization is in profit. This level may work as an important support and new highs may be seen. The loss of the 0.50 level may mean that the decline in the Bitcoin price will continue.
0.25 level: This is where NUPL enters the "Optimism-Anxiety" area. The level of profitability in the Bitcoin network continues to decline. This level can work as an important support and bullishness can be seen. The loss of this zone can be interpreted as an increase in the loss situation in the hodled Bitcoins.
0 level and below: There are now more Bitcoins (or investors) in loss than in profit on the Bitcoin network. Historical data shows that this area represents a very strong buying opportunity, and in the long run, traders have made big gains.
Critical Levels for NUPL
In the Glassnode graphic above, the critical level 0 and below is defined as the red area, 0 to 0.25 as the orange area, 0.25 to 0.50 as the yellow area, 0.50 to 0.75 as the green area, and 0.75 and above as the blue area.
Example of NUPL LONG Buying and Selling Points
In the Glassnode chart above, NUPL can be considered as a buying opportunity for the region where it is in the red area. For the region where the NUPL value is in the green area, it can be considered as a selling opportunity.
How to Use the NUPL Indicator?
In the past, the Bitcoin market has often seen a peak in the market approach when the NUPL value is 0.7 or higher. For traders, it may make sense to approach the market with caution when the NUPL is above 0.7.
Similarly, a market bottom is usually approached when the NUPL is -0.2 or lower. For traders, this could be an opportunity to buy Bitcoin.
NUPL can be a useful tool for investors to understand the profit situation and identify potential market peaks and troughs. However, it is important to consider NUPL in combination with other analysis techniques and indicators for a comprehensive market assessment.
The Use of NUPL on Traderlands
1. NUPL Value Above -0.10
Situations when NUPL breaks the -0.10 threshold
Usage in the Traderlands Strategy Creator
You can start creating a strategy by selecting the "NUPL" indicator from the list. An example strategy is shown in the image below. You can use the NUPL indicator to create a strategy after doing your own research.
Enter Algorithm Rules You Can Add To Strategy Creator
Options you can add in Trade Settings
This is how the rules for buying when the NUPL indicator breaks -0.1 to the upside and selling with various Take Profit and Trailing Stop values can be determined.
Backtest Results
1-year backtest result for BTC pair
2. A Special Strategy with EMA Calculated with NUPL Indicator
Enter Algorithm Rules You Can Add To Strategy Creator
Options you can add in Trade Settings
This is how the hourly value of the NUPL EMA (20) breaks the daily value of the EMA (50) to the upside and the rules for selling with various Take Profit and Trailing Stop values can be determined.
Backtest Results
WARNING: The entry and exit strategies in the images are written for educational purposes to explain how indicators work. It does not guarantee any profit.
When creating an algorithmic trading strategy, a rule set is usually created by connecting more than one indicator.
