On-chain data shows the Bitcoin Net Unrealized Profit and Loss (NUPL) has found rejection at the long-term resistance zone recently.

As explained by an analyst in a CryptoQuant post, the BTC NUPL metric has failed to clear a major resistance. The “NUPL” is an indicator that tells us about the degree of unrealized profit or loss that’s currently being held by the investors.

By “unrealized,” what’s meant here is that the holders have accumulated profits/losses (due to the price being more/less than what they purchased the coins at), but they are yet to actually sell their BTC to set them in stone.

When such investors who are holding unrealized profits/losses do end up selling eventually, the profits/losses they were previously holding are said to be “realized.”

When the value of the NUPL is greater than zero, it means the average investor is carrying a profit on their coins right now. On the other hand, the indicator being below this threshold suggests the market as a whole is sitting on some loss currently.

The zero value of the metric itself naturally represents the break-even level, as the total amount of unrealized profits in the market equals the unrealized losses at this mark.

Now, here is a chart that shows the trend in the Bitcoin NUPL, as well as its 365-day moving average (MA), over the last few years:

In the above graph, the quant has marked the “long-term resistance” zone that the Bitcoin NUPL has seemed to have historically followed. This area, which lies in between the values of 0.31 and 0.38, has been an important retest for the cryptocurrency, as failure here has often meant the start of a drawdown.

When coming from above, however, there have also been bullish retests of this zone, as the points marked by the green checkmarks in the chart display. A prominent example of such a successful retest was back in July 2021, when BTC hit a local bottom and proceeded with the second half of the 2021 bull run following it.

The example of a bearish resistance appears to have formed just recently, as the indicator entered the zone recently but has been rejected downwards. And with it, so has the asset’s price. It’s uncertain yet, but this rejection may have started an extended drawdown for the coin.

“Given that the NUPL index has also formed a bearish Head & Shoulders (H&S) pattern, this could mean that Bitcoin could fall into the $24,000-$20,000 range,” notes the quant. “With the successful implementation of the H&S, the local uptrend of the NUPL index will also be broken.”

The Bitcoin NUPL has also shown interesting interactions with its yearly MA in the past; the indicator has sometimes found resistance or support at this level as well.

“The last frontier for maintaining Bitcoin bullishness is the 365-day MA, which acts as reliable long-term support,” says the quant. “For the above scenario to be declared invalid, it is necessary to overcome long-term resistance sustainably!”

At the time of writing, Bitcoin is trading around $26,300, down 2% in the last week.

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