The key on-chain indicator NUPL (Net Unrealized Profit/Loss) is approaching historical levels that in past cycles preceded the formation of a market bottom. If the pattern repeats, the price of Bitcoin could drop below the $58,000 mark. This conclusion was reached by leading CryptoQuant analyst under the pseudonym TheChessOnChain.
The analyst draws attention to the smoothed 100-day exponential moving average (EMA) of the NUPL metric. Historically, this line crossing the zero mark coincided with the end of bearish phases. This was observed in late 2011 (price around $2), in January 2015 ($182), in December 2018 ($3,206), and in November 2022 amid the FTX collapse ($15,792).
Currently, the NUPL indicator is around 0.215 and continues to decline with the Bitcoin price near $63,000. According to the expert's assessment, this leaves significant room for further downside for the asset. However, he emphasizes that this is a historical pattern, not a mandatory scenario. Two possible outcomes exist: either the indicator will cross the zero line again, as in past cycles, or the current cycle will be the first where a bottom forms without such a signal, which fits the trend of gradually smoothing volatility.
Market Shows Mixed Signals
After nearly a week of growth, Bitcoin has turned downward, retreating to $63,000 after reaching a two-week high near $64,500. Derivatives market data does not confirm the sustainability of the upward movement: open interest in BTC futures has decreased from 776,000 BTC on July 3 to the current 740,000 BTC, indicating a reduction in trader activity.
Weak demand in the spot market also casts doubt on the sustainability of the rally. This is indicated by outflows from spot Bitcoin ETFs, exceeding $4 billion in June, as well as the negative dynamics of the Coinbase Premium index, reflecting the activity of American investors.
My comment: The market situation resembles a classic battle between bulls and bears, where on-chain data leans in favor of the latter. However, it is worth remembering that NUPL is a lagging indicator. The actual bottom may form without its confirmation, especially against the backdrop of growing institutional adoption. The key level to watch is $58,000. A break below it would likely open the path to testing $52,000, but at the same time, it could become an entry point for long-term investors.