NUPL - Market Sentiment Through Unrealized Profit/Loss
What is NUPL
NUPL (Net Unrealized Profit/Loss) is an on-chain indicator that represents the market's overall net unrealized profit ratio. It shows how much profit or loss all currently held coins are in, expressed as a single number.
NUPL = (Market Cap - Realized Cap) / Market Cap
Since Market Cap is the market's current value and Realized Cap is participants' total cost basis, the difference is exactly the market's total net unrealized profit. NUPL expresses this as a ratio by dividing by Market Cap.
Calculation Method
Formula
NUPL = (Market Cap - Realized Cap) / Market Cap
This can be rearranged as:
NUPL = 1 - (Realized Cap / Market Cap) = 1 - (1 / MVRV)
Therefore, NUPL is mathematically connected to the MVRV ratio.
Calculation Example
| Item | Value |
|---|---|
| Market Cap | $1,500,000,000,000 |
| Realized Cap | $600,000,000,000 |
| Net Unrealized Profit | $900,000,000,000 |
| NUPL | 0.60 |
A NUPL of 0.60 means 60% of market cap is unrealized profit.
Relationship with MVRV
| MVRV | NUPL | Meaning |
|---|---|---|
| 4.0 | 0.75 | 75% of market cap is unrealized profit |
| 2.0 | 0.50 | 50% of market cap is unrealized profit |
| 1.0 | 0.00 | Break-even. No unrealized profit/loss |
| 0.5 | -1.00 | Unrealized loss equal to market cap |
The 5-Stage Market Sentiment Framework
The most powerful application of NUPL is classifying the market into 5 sentiment stages. This framework allows intuitive understanding of Bitcoin cycles.
Zone Definitions
| Stage | NUPL Range | Color | Market Sentiment | Description |
|---|---|---|---|---|
| Stage 1 | < 0 | Red | Capitulation | Entire market in loss. Extreme fear |
| Stage 2 | 0 - 0.25 | Orange | Hope/Fear | Early recovery. High uncertainty |
| Stage 3 | 0.25 - 0.50 | Yellow | Optimism | Confidence building. Bullish sentiment spreading |
| Stage 4 | 0.50 - 0.75 | Light Green | Belief | Full bull market. High returns |
| Stage 5 | > 0.75 | Green | Greed/Euphoria | Extreme overheating. Peak imminent |
Detailed Analysis of Each Stage
Stage 1: Capitulation (NUPL < 0)
The entire market is in unrealized loss. When entering this zone, holders panic and capitulate, with extreme pessimism like "crypto is dead" dominating.
Historical Pattern: The capitulation zone has coincided with the best buying opportunities ever. All major cycle bottoms occurred when NUPL was negative.
- Early 2015: NUPL dropped to -0.3, followed by 2017 bull market
- Late 2018: NUPL dropped to -0.2, followed by 2020-2021 bull market
- Mid 2022: NUPL entered negative territory, followed by 2023 upward reversal
Stage 2: Hope/Fear (NUPL 0 - 0.25)
The market has crossed break-even into slight profit territory. However, memories of the recent bear market linger, confidence is lacking, and fear resurfaces with small declines.
Characteristics: Price corrections in this zone can push NUPL back into negative territory, creating high volatility.
Stage 3: Optimism (NUPL 0.25 - 0.50)
As a significant portion of holders enter profit territory, market sentiment shifts positive. Media attention increases and new participants begin entering.
Characteristics: This is a healthy bull market zone. Investors entering in this stage often achieved significant returns before the cycle peaked.
Stage 4: Belief (NUPL 0.50 - 0.75)
Most market participants are in significant profit. Confidence in the bull market is strong, and optimism that "this time is different" spreads.
Characteristics: Long-term risk begins increasing in this zone. It's prudent to start gradual selling for risk management.
Stage 5: Euphoria (NUPL > 0.75)
More than 75% of market cap is unrealized profit. Extreme optimism and greed dominate, and emotion rather than rational judgment drives the market.
Historical Pattern: Every instance where NUPL exceeded 0.75 was followed by a significant decline. This zone is the most dangerous time to buy and the optimal time to sell.
Historical Cycle Mapping
| Period | NUPL Peak | NUPL Low | Cycle Characteristics |
|---|---|---|---|
| 2013 | ~0.85 | ~-0.30 | Double top. Entered euphoria twice |
| 2017 | ~0.78 | ~-0.25 | Sharp rise and fall |
| 2021 | ~0.73 | ~-0.15 | Peaks progressively getting lower |
Like MVRV, NUPL extreme values also tend to decrease as cycles progress. This reflects market maturity.
Combining with Other Indicators
NUPL + SOPR
NUPL shows unrealized profit/loss, SOPR shows realized profit/loss.
| NUPL | SOPR | Interpretation |
|---|---|---|
| High (Belief/Euphoria) | > 1.0 (High) | Profit-taking in progress. Peak warning |
| High | ~1.0 | Profit-taking slowing. Still upside potential |
| Negative (Capitulation) | < 1.0 | Both unrealized and realized losses. Near bottom |
| Near 0 | 1.0 transition | Early trend reversal |
NUPL + Exchange Flows
- NUPL in euphoria zone + Exchange inflow surge → Large-scale selling imminent
- NUPL in capitulation zone + Exchange outflow increase → Smart money accumulating
NUPL + Technical Analysis
- NUPL capitulation + RSI oversold + Bollinger Bands lower band → Strong bottom signal
- NUPL euphoria + RSI overbought + Divergence → Strong top signal
Practical Application Tips
Cycle-Based Strategy
| Stage | NUPL | Strategy |
|---|---|---|
| Capitulation | < 0 | Accumulate as much as possible. Best long-term buying opportunity |
| Hope/Fear | 0 - 0.25 | Continue dollar-cost averaging. Prepare for volatility |
| Optimism | 0.25 - 0.50 | Hold position. Portfolio rebalancing |
| Belief | 0.50 - 0.75 | Begin gradual selling. Secure profits |
| Euphoria | > 0.75 | Active profit-taking. Increase cash allocation |
Simple Rules for Long-Term Investors
- When NUPL enters below 0, start monthly dollar-cost averaging
- When NUPL exceeds 0.5, stop additional buying and hold
- When NUPL exceeds 0.75, begin gradual selling of holdings
- When NUPL drops back below 0.25, resume buying
Limitations and Considerations
Changing Absolute Thresholds
As the market matures, NUPL extreme values may change. The peak that reached 0.85 in 2013 only reached 0.73 in 2021. In the future, the euphoria threshold may need to be adjusted to 0.70 or lower.
Impact of Lost Coins
Realized Cap may be calculated lower than actual due to lost coins, which has the effect of pushing NUPL higher.
Timing Imprecision
Even after NUPL enters the euphoria zone, prices can continue rising for weeks to months. Precise sell timing should be supplemented with SOPR, technical analysis, and other tools.
UTXO-Based Limitation
Like Realized Price, NUPL is based on Bitcoin's UTXO model, and methodological differences should be noted when applying to other blockchains.
Summary
NUPL is an indicator that shows the overall market's unrealized profit/loss state by expressing the difference between market cap and realized cap as a ratio. The 5-stage framework of Capitulation (< 0), Hope/Fear (0-0.25), Optimism (0.25-0.5), Belief (0.5-0.75), and Euphoria (> 0.75) enables intuitive understanding of and response to Bitcoin cycles. Combining with SOPR, MVRV, and exchange flows allows more precise assessment of position within the cycle.
Next article: Fear and Greed Index - The Comprehensive Market Sentiment Indicator