NUPL Score
Net Unrealized Profit/Loss (NUPL) is a valuable on-chain metric that gauges the overall sentiment and potential market turning points within the cryptocurrency ecosystem. By analyzing the proportion of unrealized profits and losses held by investors, NUPL offers insights into whether the market is predominantly in a state of profit or loss, aiding in the identification of bullish or bearish trends.
Key Features:
Market Sentiment Assessment:
NUPL quantifies the balance between investors' unrealized gains and losses
Provides a clear picture of collective market sentiment
Ranges from -1 to 1, with specific thresholds indicating market phases
Trend Identification: By monitoring NUPL values, traders can discern prevailing market trends and anticipate potential reversals.
Threshold Indicators: Specific NUPL value ranges correspond to distinct market phases, such as optimism, anxiety, or capitulation, offering actionable insights for strategic decision-making.
How It Works:
NUPL is calculated using the formula:
NUPL = (BTC_Correlation_Weight * BTC_NUPL) + (VWAP_Weight * VWAP_NUPL)
VWAP_NUPL = (Market Price - Realized Price) / Market Price
Realized Price = (0.5 * LongTermVWAP) + (0.3 * MediumTermVWAP) + (0.2 * ShortTermVWAP)Where:
Market Cap: The current total value of the cryptocurrency in circulation.
Realized Cap: The aggregate value of coins based on their last movement price, reflecting the price at which each coin last transacted.
A positive NUPL indicates that investors, on average, hold unrealized profits, suggesting bullish sentiment. Conversely, a negative NUPL points to unrealized losses, implying bearish sentiment.
Interpretation
NUPL > 0.5: Extremely Overbought (Market Euphoria)
NUPL < -0.5: Extremely Oversold (Market Capitulation)
-0.5 ≤ NUPL ≤ 0.5: Neutral Zone
Trading Signals
Triggered when NUPL ≤ -0.25
Indicates potential buying opportunity
Requires confirmation from previous higher NUPL value
Sell Signals
Triggered when NUPL ≥ 0.75
Suggests potential profit-taking opportunity
Requires confirmation from previous lower NUPL value
Usage Tips:
Monitor Extreme Values: High positive NUPL values may signal market euphoria and potential overvaluation, serving as a caution for possible corrections. Low or negative values could indicate fear and potential undervaluation, presenting buying opportunities.
Combine with Other Indicators: For a comprehensive analysis, use NUPL alongside other on-chain metrics and technical indicators to validate trends and enhance decision-making.
Historical Context Analysis: Review past NUPL trends in relation to price movements to identify patterns and improve future market prediction.
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