The Bitcoin Sell the Rally indicator flashes again when the BTC price drops below $ 45,000

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A Bitcoin (BTC) on-chain indicator that spotted dead hopes during past bearish market corrections surfaced again in August 2021.

The indicator known as “Bitcoin: Short Term Holder NUPL” takes into account the unspent transaction output (UTXO) of BTC transactions that are not older than 155 days. It tries to determine whether an investor is profitable within 155 days of buying and holding Bitcoin.

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If the NUPL, which stands for “net unrealized gains / losses”, returns a value below zero, it means that investors are making losses on their Bitcoin investments. Conversely, a NUPL above zero shows that investors are making profits.

Glassnode reported on Aug. 12 that the Bitcoin NUPL has bounced back above zero for short-term investors, indicating its profitable state for the first time since the crypto market crash in May 2021. Meanwhile, the blockchain analysis platform also signaled fears of a possible sell-off and cited fractals from the 2014–2015, 2018 and March 2020 bear cycles.

NUPL chart for Bitcoin short-term holders. Source: Glassnode

In detail, short-term Bitcoin holders have used the recovery rallies during the corrections to secure interim profits.

The price movement from the declining 2014-2015 season shows that BTC / USD is resuming its downward correction despite a 100% recovery. In 2018, an upward retracement of 97.41% did little to protect the market from the prevailing bearish trend.

Bitcoin price recovery did not last through the 2014-2015 and 2018 bearish cycles. Source: TradingView

The most recent upward rally in 2021 came after Bitcoin’s prices plummeted from around $ 65,000 to around $ 29,000. The cryptocurrency rebounded to $ 46,787 on the Bitstamp exchange after experiencing a major rebound thereafter – a 63.59% increase.

Bitcoin corrected down again on Aug. 12, falling below its psychological support level of $ 45,000. At its intraday low, the cryptocurrency changed hands for $ 44,100.

BTC / USD price history in recent history. Source: TradingView

The deviant bullish case

Glassnode noted that such “quick recoveries” are common in two instances: recovery rallies in bear markets and periods of disbelief in bull markets.

Therefore, the blockchain analytics platform did not rule out the possibility of an extended bull run, as observed during the upward booms of 2013, 2019 and 2020.

Further evidence to confirm the bullish outlook comes from Glassnode’s report released earlier this week. The platform saw a decline in short-term holders in line with an increase in long-term holders, causing long-term holder Bitcoin supply to hit a new all-time high of 82.68% of all coins in circulation.

Related: Big Hodlers amass Bitcoin under $ 50,000 while BTC transactions soar above $ 1 million

Meanwhile, the coin owned by short-term owners dropped to 25% of the net bitcoin supply in circulation, suggesting an increase in holding behavior.

Offer ratio for long-term and short-term owners. Source: Glassnode

In the past, a decrease in the short-term owner quota to 20% leads to a supply bottleneck scenario – i.e. H. when the coins in circulation lag behind current demand.

“This is very similar to the volume of coins held by [long-term holders] in October 2020, before the primary upside kicked in, “wrote Glassnode analysts, adding:

“While the supply shortage due to the [short-term holder] The supply quota is not yet 20%, there are numerous indicators and trends that suggest that it could be reached by mid-September (but that the conditions for a supply bottleneck are already in place).

Bitcoin was trading at around $ 44,200 at the time of writing.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every step of investing and trading involves risk and you should do your own research when making a decision.