The Net Unrealized Gain/Loss (NUPL) chart for Bitcoin visually reflects investor sentiment and market phases.
At the time of publication, Bitcoin has once again entered the “Faith” stage. This phase is characterized by a return to confidence and long-term holding as prices move well above the last major peak.
This stage is usually followed by a phase of “Optimism”, which is preceded by “Euphoria”. This indicates a strong and ongoing belief in Bitcoin’s potential for higher valuations.
The move to Faith is notable because it suggests that most holders are profiting but not yet forced to sell, betting that prices will rise further.
The position of the NUPL line, confidently moving into the green zone, confirms this interpretation, reflecting healthy market optimism. However, the exact duration of this phase remains uncertain.
Historically, the transition from “belief” to “euphoria” has varied significantly depending on broader market conditions, investor sentiment and macroeconomic factors.
While there is room for growth, the market’s next move is uncertain. Monitoring NUPL for signs of changing sentiment that may precede a new phase, potentially heralding the peak of the current cycle, is critical.
Long Liquidations Approaching
Bitcoin heat maps have highlighted critical zones where significant price movements could occur due to liquidation events.
The first chart showed a clear resistance zone around $77.5k. This could become a target during important market events such as the FOMC statement.
A cluster of liquidation levels just below this price indicates a high concentration of stop orders. If it works, it could push the price towards that upper limit.
The second chart provided a detailed view of recent trading activity, showing a surge in long liquidations. This accumulation indicates that many traders are ready for further price increases.
They use high leverage, which increases the risk of a prolonged squeeze. If the market experiences a rapid pullback, these long positions could be liquidated en masse.
This will cause the price of Bitcoin to plummet as the market struggles to find liquidity. Once established, the potential for a pullback to get rid of long positions caused by FOMO could become real.
Traders can expect a turbulent period leading up to the weekend, with volatility likely to increase as liquidation events unfold.
The scenario pointed to the possibility of both a jump to $77.5 thousand if bullish pressure prevails during the FOMC meeting, and a possible sharp decline if the market corrects and long positions are forced out.
Will $80k be the best?
The graphs also show a repeating pattern of highs marked by phases of euphoria that follow the second largest pump in each cycle, as shown by the yellow circles.
Historically, Bitcoin has risen significantly since these pumps: 362% in 2013, 566% in 2017, and 406% in 2021. Based on these patterns, the chart suggests a potential upside of 236% from the current level of around $74K.
If the historical pattern holds, that would mean the high would be around $248K. Additionally, the chart shows that these euphoric tops often become focal points in subsequent bear markets, as shown in the white boxes.
For example, during the 2015 bear market, the price of Bitcoin fell just below its previous euphoric high. In 2019 and 2022, it remained consistently above it.
This observation supported the theory that $70K to $80K could act as a critical support range in any upcoming bear market.
The timing of reaching a new euphoric phase may be influenced by the same duration and growth rate as in previous cycles.
If Bitcoin follows the historical rhythm, we can expect an acceleration towards euphoria over the next 1-2 years, depending on market dynamics and investor sentiment following previous patterns.
