A look at on-chain indicators for Bitcoin (BTC), more specifically the Net Realized Profit/Loss (NRPL) indicator, in order to gauge the current state of the market and determine the reason for a July 17 spike in the indicators.
NRPL spiked considerably on July 17. A look at the Supply-Adjusted Coin Days Destroyed (CDD) metric indicates that this occurred from selling coins that had been held for a considerable period of time.
Realized profit and loss
The Net Realized Profit/Loss indicator shows the net value of all transactions in the market in a specific day. If the coin moved at a lower price than its most recent UTXO, a realized loss is recorded. If it is moved at a higher price, a realized profit is recorded.
Therefore, in order to determine the total state of the market, realized losses are subtracted from realized profits.
The market has mostly recorded net losses since May 13. This culminated on June 25, when a net realized loss of $3,456 billion was recorded.
The trend seemingly reversed on July 17, when $1,416 billion of net realized profits were recorded. Since the price was at $31,548, without changing significantly relative to the previous week, these were either BTC held from 2020, when the price was below $30,000, or BTC bought at the absolute bottom on June 22 or 26.
The fact that the NRPL indicator moves from positive to negative is a sign of an undetermined trend. The same was visible throughout the majority of 2018, when the indicator moved above and below the 0 line numerous times prior to an eventual breakdown.
Conversely, NRPL is overwhelmingly and consistently positive during bull runs, as was visible in the upward movement that began in March 2020 and led to the April 2021 all-time high.
What caused the July 19 spike?
We stated in the previous section that the NRPL spike on July 17 was either caused by a long-term holder or by entities that bought the June bottom.
A look at Supply-Adjusted (CDD) indicates that the spike occurred as a result of long-term holders. CDD is an on-chain indicators that measures the amount of time a coin is unspent before it is finally transacted.
Therefore, high values show that a coin that had accumulated for a significant period of time was finally spent.
On July 17, supply-adjusted CDD recorded a value of 4.22, more than double the yearly high of 1.90. This suggests that the selling was done by coins that had been held for a long period of time.
This can also be seen by exchange net flow volume. This is another on-chain indicator which shows a massive spike on July 17.
This indicates that a long-term holder transferred their BTC to an exchange and then immediately liquidated it, as seen by the spikes in NRPL and CDD.
Nevertheless, this was likely an individual that does not represent the sentiment of the majority of long-term holders or whales.
Accounts that hold between 1,000 and 10,000 BTC have been steadily accumulating since the beginning of May, showing increased conviction from holders with significant balances.