Bitcoin [BTC]: Indicators point to a bull cycle, and data on the chain reveals…

• BTC’s NUPL suggests that the coin has started a new bull cycle.
• However, increasing coin dumping indicates a lack of investor confidence.

In a new one reportCryptoQuant analyst Sachi found that the assessment of Bitcoins [BTC] Net Unrealized Profit/Loss (NUPL) revealed that the leading coin has started another bull cycle.

NUPL is a metric used to evaluate the profit margin of the BTC market relative to its market capitalization. A value below zero indicates an accumulation phase, while values ​​above 0.5 suggest a distribution phase.

According to Sachi, “the crucial threshold to monitor is 0.2.” In the current market, BTC’s NUPL has reached this “decisive” position.

The analyst’s review of BTC’s historical performance found that a golden cross, which typically occurs between the 128- and 200-day moving averages, signals the end of the accumulation phase when the NUPL metric reaches or exceeds 0.2. This means the start of a bull market.

Sachi concluded that a bull cycle was underway when all three critical factors were present again in the current cycle.

Source: CryptoQuant

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Accumulation has slowed, but only because…

For the first time since the unexpected fallout of cryptocurrency exchange FTX, BTC briefly traded above the $25,000 price mark on February 16.

Although the price of the king coin later continued to trade below $25,000, investors expected for a few weeks that BTC would regain its price position, leading them to open several long positions.

However, things did not go as expected, which led to waning conviction in further price increases. Investor confidence fell further on March 3 when BTC’s price suddenly dropped 5%, falling from $23,500 to $22,240 due to a sense of uncertainty and doubt around Silvergate capital.

This led to liquidation of the previously opened long positions.

While Sachi believed that the decline in accumulation and other factors ushered in a new bull cycle, a look at chain data and price charts revealed otherwise.

First, BTC’s Open Interest has been in a downtrend since February 21st. The drop in Open interest coincides with a 10% drop in the asset’s value.

When the open interest of a crypto asset falls, it means that the number of outstanding contracts or positions in the market has decreased.

It is often accompanied by a decline in market sentiment or a decline in the number of traders willing to take positions in the market. As expected, this reduces the value of an asset.

Source: Coinglass

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Furthermore, on a daily chart, increased coin distribution has put buyers at the mercy of sellers. Key momentum indicators such as RSI and MFI were positioned in downtrends and rested below their respective neutral regions.

Likewise, the coin’s Chaikin Money Flow (CMF) returned a negative -0.09 at press time, indicating the severity of the coin distribution. Without a change in conviction, this usually precedes a further price decline.

Source: BTC/USDT on TradingView

Finally, a look at BTC’s funding rates across exchanges confirmed the lack of confidence pervading the market at press time. Per data from CryptoQuant, at the time of writing, short positions exceeded long positions. It was the highest negative financing rate so far this year.

Source: CryptoQuant