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Net Unrealized Profit/Loss (NUPL)

Net Unrealized Profit and Loss (NUPL) is the difference between market cap and realized cap divided by market cap.

Definition

Net Unrealized Profit and Loss (NUPL) is the difference between market cap and realized cap divided by market cap.
NUPL=Market Cap - Realized CapMarket CapNUPL = \frac{\text{Market Cap - Realized Cap}}{\text{Market Cap}}

Interpretation

By Value Itself

Net Unrealized Profit and Loss NUPL – Source: CryptoQuant
Assuming that the latest coin movement is the result of a purchase, NUPL (Net Unrealized Profit and Loss) indicates the total amount of profit/loss in all the coins represented as a ratio.
  • Values over ‘0' (+): Coins or investors who are in profit are more than investors that are in loss In order for NUPL to be over 0 (+), the Market Cap has to be larger than the Realized Cap. As Market Cap rises above the Realized Cap, it indicates that the value that is being traded on market is greater than the on-chain expected value. For example, if the NUPL value hits 0.75, it means that Market Cap is four times the Realized Cap. It is reasonable to assume that most coins that were moved are on profit and the wide gap between the Realized Cap and Market Cap could act as selling pressure.
  • Values under ‘0' (-): Coins or investors who are in loss are more than investors that are in profit In order for NUPL to be under 0 (-), the Market Cap has to be less than the Realized Cap. As Realized Cap exceeds the Market Cap, it indicates that the value that is being traded on market is greater than the on-chain expected value. For example, if the Net Unrealized Profit/Loss value hits -0.5, it means that Market Cap is half the Realized Cap. It is reasonable to assume that most coins that were moved are on loss and the wide gap between the Realized Cap and Market Cap could act as a buying motive.

By Examining Trend

Decreasing and Increasing Selling Pressure – Source: CryptoQuant
It shows the changing profit geography of investors
  • Increasing trend: Increasing selling pressure
    More coins or investors are beginning to be in profit and this phase naturally indicates the increasing motive to take profit which leads to an increase in sell pressure. Also, it indicates that Market Cap is exceeding Realized Cap making coins profitable to be sold through the market.
  • Decreasing trend: Decreasing selling pressure
    More coins or investors are beginning to be in loss and this phase naturally indicates the decreasing motive to realize loss which leads to a decrease in sell pressure. Also, it indicates that Realized Cap is exceeding Market Cap making coins less profitable to be sold through the market.

Investing Applied Scenario

Net Unrealized Profit/Loss (NUPL) stands as a pivotal metric, offering profound insights into the intricate dynamics of Bitcoin investments, reflecting investor sentiment, profit-taking strategies, and strategic decision-making by investors.
When Net Unrealized Profit/Loss (NUPL) surpasses 0.7, a key principle comes into play, signifying proximity to the market top. This principle serves as a guiding force for cautious investors, prompting considerations for Bitcoin investors taking profit. The NUPL value, indicative of a substantial market cap exceeding realized cap, highlights a scenario where investors may strategically take profit, influencing average prices and contributing to increased selling pressure.
Conversely, in a market with a Net Unrealized Profit/Loss (NUPL) of -0.2 or lower, a distinct key principle unfolds, signaling an opportune moment closer to the market bottom. This presents a potential buying opportunity for investors looking to accumulate at perceived undervalued levels. The NUPL value in this scenario suggests that realized cap exceeds market cap, indicating that coins are less profitable to be sold in the market. Strategic investors, recognizing this advantageous condition, may engage in accumulation strategies, influencing average prices with a potential dip.
The interconnectedness of Net Unrealized Profit/Loss with investor sentiment, profit-taking motives, and strategic accumulation underscores the importance of monitoring these factors. In this dynamic strategic investor landscape, the influence of realized value, market value, market trends, Bitcoin price, relative unrealized profit, and relative unrealized loss becomes evident, impacting profit-taking decisions, average prices, and guiding strategic investors as they track Bitcoin price movements.

Net Unrealized Profit (NUP)

Sum of UTxO being in profit with the price difference between created and destroyed.

Net Unrealized Loss (NUL)

Sum of UTxO being in loss with the price difference between created and destroyed.

Net Unrealized Profit and Loss (NUPL)

The difference between market value and realized value