The on-chain analytics firm CryptoQuant has revealed the five Bitcoin indicators that tell us what’s happening beneath the surface.
These Are The Top Five Bitcoin Indicators To Watch
In a new post on X, CryptoQuant discusses how real signals originate from on-chain data, with price moves merely providing a surface-level narrative. The analytics firm has shared its top five Bitcoin indicators that help uncover these signals.
The first metric is the “Realized Price,” a popular indicator that provides an estimation for the average cost basis of investors on the BTC network. Historically, it has often played the role of a major support/resistance level for the cryptocurrency.
A few different variations of this metric exist, with the one shown below being the Realized Price specifically for the short-term holders.
The trend in the short-term holder Realized Price during the last few years | Source: CryptoQuant on X
As displayed in the graph, the Bitcoin price is currently trading above the Realized Price of the short-term holders, which implies the cohort’s members are in a state of net profit.
The next indicator is the “Spent Output Profit Ratio” (SOPR), which gauges whether the BTC investors are selling or transferring their tokens at a net profit or loss.
The metric’s value being greater than 1 implies the holders are participating in profit-taking, while a value under this threshold suggests the dominance of loss realization. From the below graph, it’s visible that the short-term holders have been showcasing the former type of behavior recently.
Looks like the indicator's value has been above 1 recently | Source: CryptoQuant on X
A large profit-taking spike in the market can provide impedance to the Bitcoin price, and a loss-taking may lead to a bottom. An indicator that can hint at which of these behaviors might be more probable to emerge is the next one of interest: the “Net Unrealized Profit/Loss” (NUPL).
This indicator tells us, as its name already implies, the net amount of unrealized profit or loss that Bitcoin investors as a whole are carrying right now.
The data for the NUPL of the entire BTC network over the cryptocurrency's existence | Source: CryptoQuant on X
Generally, holders become more tempted to take their profits as they grow larger. Therefore, a profit-loss balance in the market that leans heavily toward gains (i.e., a high NUPL) can lead to a selloff driven by the motive of profit realization.
On the other hand, a dominance of loss (low NUPL) can imply an exhaustion of profit-takers, which can facilitate the formation of a bottom as underwater hands capitulate to transfer their coins to more resolute entities.
The fourth indicator is the distribution of supply between short-term holders and long-term holders. The short-term holders, who were already mentioned earlier, are formally defined as the buyers from the past 155 days. Investors who manage to hold past this threshold are termed as the long-term holders.
The supply of the long-term holders has seen a small rebound in recent days | Source: CryptoQuant on X
Usually, an increase in the supply of long-term holders is a sign that HODLing behavior is growing among investors. As shown in the graph, this metric was in decline earlier as the resolute hands took part in profit-taking, but recently, it has shown signs of a turnaround.
Lastly, there is the Open Interest, which is an indicator that measures the total amount of capital that’s locked in contracts related to Bitcoin on the futures market.
The USD-denominated Open Interest of BTC | Source: CryptoQuant on X
As is apparent in the chart, the Bitcoin Open Interest has exploded to a new record recently, a sign that speculative activity has shot up. This is something that has often preceded price volatility.
BTC Price
Bitcoin has seen some pullback in the past day as its price is back at $108,000.
BTC has been flat over the past few days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com
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