3 Key Indicators
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Professional investors combine on-chain and market data to create indicators or signals designed to 'flash' or alert them before changes in prices occur. What would be the most popular indicator in CryptoQuant? Check 3 indicators that have been viewed the most.
A valuation indicator to determine potential bubbles by analyzing cost basis
Long-term holders hold Bitcoins long enough until the price meets their return expectations before selling them. When selling Bitcoins, the transaction is made to other wallets through OTC deals or crypto exchanges, which can then be considered realized revenue. Realized Cap is the sum of all these transactions made in Bitcoins.
When there is a gap between Realized Cap and Market Cap, the MVRV number will increase, which can also be interpreted as unrealized profit or loss increasing. When the MVRV ratio increases above a certain threshold this means that the asset is overvalued. On the other hand, when the MVRV number decreases beyond a certain threshold, this can be interpreted as participants holding unrealized losses and that the asset is undervalued.
Generally, MVRV above 3.7 is considered overvalued, and below 1 is considered as undervalued.
An indicator to determine the amount of unrealized profit/loss
NUPL uses Realized Cap to show the ratio of Unrealized Profit/Loss. If there is an increase in Unrealized Profit in the blockchain network, the probability of a price drop increases. Vice versa, if there is an increase in Unrealized Loss in the blockchain network, the probability of a price rise increases.
Generally, in the long term, NUPL above 0.75 is considered overvalued, and below 0 is considered undervalued.
An indicator to capture long-term holder's investment
Since Bitcoin trading is like using a check. Let's say John needs to give Jane $100. When John gives Jane $100 by using a $1K check, Jane receives a $1K check from John, creates a $900 check and $100 check from a $1K check, and returns a $900 check to John. The $1K check will then be disposed of. This kind of check system in Bitcoin is called UTXO(Unspent Transaction Output).
LTH-SOPR is an indicator of how much profit/loss is generated from UTXOs that have not been used for over 155 days. If the profit is greater using the UTXO(check), the LTH-SOPR value increases, and vice versa for the loss.
Generally, LTH-SOPR above 1 is considered long-term holders are making a profit, and below 1 is considered long-term holders are making a loss.
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