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Cryptoquant Bitcoin as a PnL channel. index has surged over its 365 days ma recently, a crossing that has historically flagged bull markets early.
Bitcoin On-Chain PnL The index has gone up.
As per data from the on-chain analytics firm CryptoQuant, the index is indicating a buy signal for BTC right now. The "cryptoquant on-chain pnl index" is a measure that combines three different indicators into a single to highlight the summits, funds, and cyclical changes in the price of Bitcoin.
The first of the metrics that the PnL index uses is the “MVRV ratio,” which is a model that checks whether BTC is currently overvalued or undervalued by comparing the crypto’s market cap with a fair value model called the “realized cap.”
The second relevant indicator here is the “NUPL,” which tells us whether the Bitcoin market as a whole is currently carrying an unrealized profit or an unrealized loss. This measure may give information on the existence of a reason for purchase or sale among investors at present.
Lastly, there is the ratio of operating income spent (sopr), which allows us to know whether the average holder is currently selling at a loss or a profit. Don't confuse the sopr with the nupl, given that the quantity measured by the nupl is the profit/loss "not realized", which is the profit or loss that investors have built up but are still reaping (or "realizing") as they are still selling their coins.
There are actually two sopr indicators of interest here; one for short-term holders (sths) and the other for long-term holders (lths). Bitcoin market as a whole can be divided into these two groups, Holders who have purchased in the past 155 days belong to the previous cohort, while those who have purchased before fall into it.
Now, here is the data for the CryptoQuant on-chain PnL index, which takes all these different Bitcoin indicators and combines them into one model for the crypto:
Looks like the value of the metric has shot up | Source: CryptoQuantAs shown in the chart above, the PnL chain CryptoQuant Index has recently increased significantly relative to the lower historical area. The chart also includes the moving average curve over 365 days (ma) of the metric, and it is clear that the index crossed over that curve with the last wave.
Historically, such a bearish crossover has marked a transition to an early bullish market. If this trend continues again, then the current breakout could be good news for the recovery underway.
However, in 2015, a first such breakout ended in failure, and only later did a successful transition occur. However, CryptoQuant notes "even though it is still possible for the index to fall below, the CryptoQuant PnL has issued a definitive purchase signal for BTC."
As of writing, Bitcoin is trading around $22,900, up 11 percent in the past week.
BTC seems to be showing stale price action | Source: BTCUSD on TradingView
