An analyst has revealed a simple strategy to buy and sell bitcoin using the historical pattern followed by two btc on-chain indicators.
These bitcoin On-Chain Indicators Have Followed a Specific Pattern Historically
in a twitter.com/AxelAdlerJr/status/1773606175394681280″ target=”_blank” rel=”nofollow”>mail In x, CryptoQuant author Axel Adler Jr. discussed a simple strategy for timing bitcoin buying and selling movements. The strategy is based on the historically observed trend in two btc on-chain metrics: net unrealized loss (NUL) and net unrealized gain (NUP).
As their names suggest, these indicators track the total amount of unrealized gains and losses that investors currently have.
These metrics work by reviewing the transaction history of each currency in circulation to see what price the last transaction was made at. Assuming that the last transfer of each coin was the last time it changed hands, the price at that instant would act as its current cost basis.
If the previous price of any coin was less than the current spot price of the cryptocurrency, then that coin is currently making profits. The NUP subtracts the two to calculate the exact unrealized gain on the coin.
Similarly, the NUL does the same for currencies whose cost is higher than the last value of the asset. These indicators then sum this value for the entire supply and divide the sum by the current market capitalization.
Now, first, here is a chart shared by the NUL analyst that reveals a pattern the metric has followed throughout bitcoin's history:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/What-is-a-simple-strategy-for-buying-and-selling-Bitcoin.jpeg" alt="bitcoin NUL” width=”2048″ height=”1290″ loading=”lazy”/>
The value of the metric seems to have been heading down in recent days | Source: twitter.com/AxelAdlerJr/status/1773606175394681280/photo/1" target="_blank" rel="nofollow">@AxelAdlerJr on x
Historically, bitcoin NUL appears to have broken above the 0.5 level when the asset's price has traded around bear market lows. According to Axel, the indicator in this territory would be the time to buy more.
Recently, the metric has been floating around the zero mark, meaning investors have been taking unrealized losses. This makes sense, as the cryptocurrency has established new all-time highs (ATH). Naturally, 100% of the supply generates profits when an ATH is established.
Similar to the pattern in NUL, NUP has been above the 0.7 level during major highs in the past, suggesting that it may be a good opportunity to sell when the indicator is in this zone.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/1711815076_542_What-is-a-simple-strategy-for-buying-and-selling-Bitcoin.jpeg" alt="bitcoin NUP” width=”2048″ height=”1290″/>
Looks like the value of the indicator has been climbing up recently | Source: twitter.com/AxelAdlerJr/status/1773606175394681280/photo/2" target="_blank" rel="nofollow">@AxelAdlerJr on x
As can be seen from the chart, NUP has been advancing with bitcoin's recent rally. Still, so far, the indicator has not broken above the seemingly important 0.7 level, implying that the market may not yet be in an overheated place where selling would be ideal, at least according to this strategy.
However, the charts of the two indicators show that neither of them marked the exact highs or lows of the asset. It's especially prominent in the NUP data, where the metric indicated “sell” during spikes that were barely halfway through the bull market.
That said, buying during NUL marked points and then selling at overheated NUP values would have been historically profitable. In that sense, this would effectively be a “simple” strategy for the asset.
However, it remains to be seen whether these patterns will continue to hold in the current bitcoin cycle as well.
btc Price
At the time of writing, bitcoin is trading at around $69,400, down 2% in the last 24 hours.
x/BwQbBOXI/” alt=”bitcoin price chart” width=”1534″ height=”854″/>
The price of the asset appears to have been moving sideways recently | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, CryptoQuant.com, TradingView.com chart
Disclaimer: The article is provided for educational purposes only. It does not represent NewsBTC's views on whether to buy, sell or hold investments, and investing naturally carries risks. It is recommended that you conduct your own research before making any investment decisions. Use the information provided on this website at your own risk.
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