A BTC parameter has reached the belief zone for the first time in 15 months

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Glassnode data indicates that Bitcoin has entered the belief zone for the first time since July 2019, indicating the beginning of a bullish cycle.

Bitcoin (BTC) could be in the initial phase of a new big bullish cycle, as suggested on October 27th by a fundamental on-chain parameter. The first cryptocurrency has entered the „belief zone,“ which historically marked the beginning of explosive rises.

According to Glassnode, the last time the Net Unrealized Profit/Loss (NUPL) reached the belief zone was in June 2019. In the following month, Bitcoin saw an increase from about $7,500 to $13,868, more than 80%.

Bitcoin’s NUPL traced on the daily historical Bitcoin Fortune chart
The Bitcoin NUPL plotted on the daily historical chart. Source: Glassnode
What is NUPL and why does it indicate the start of a Bitcoin bull run?
The NUPL parameter essentially measures how many Bitcoin owners are in profit or loss. If the parameter increases, it means that more investors are in positive since they bought BTC.

Glassnode researchers calculate the NUPL by evaluating the price of Bitcoin when it arrives at a new address.

Since a new buyer must keep BTC at an address never used before, newly created addresses usually mean BTC just bought. The researchers have explained:

„The number of UTXOs in profit/loss is calculated in a linear way: we simply count all existing UTXOs whose price at the time of creation was lower or higher than the current price, respectively“.
At the moment, over 50% of Bitcoin’s market cap is represented by unrealised profits. This means that the vast majority of BTC owners and investors are profitable.

Despite the possible negative interpretation of the parameter that investors might start selling, historically the NUPL should reach a much higher level to signal a maximum. Glassnode commented:

„Bitcoin investor sentiment: The Net Unrealized Profit/Loss (NUPL) has been in the ‚Belief‘ zone for a week. Currently, over 50% of BTC’s market cap is made up of unrealised profits, a level not seen since August 2019“.
During 2017, Bitcoin remained in the Belief zone for an extended period of time, compared to an increase in 2019. A similarly extended accumulation phase may emerge in 2021 due to the post-halving cycle.

Analysts often attribute the 2017 bull run to the post-halving cycle. In July 2016, Bitcoin witnessed its second block reward halving. This event halved the program to issue new BTCs, directly affecting its offering. One year after the halving, BTC began its parabolic growth.

The most recent halving took place in May 2020. If such a pattern were to form, BTC could continue to grow throughout 2020 and until the second half of 2021.

The psychology of a market cycle and the belief zone
The psychology of a market cycle and the belief zone. Source: TradingView.com
What analysts forecast for BTC’s short-term trend
In the short term, analysts and traders expect the Bitcoin price to see a pullback to a healthy consolidation phase.

Santiment researchers have said that on-chain and social media parameters are showing worrying signs, perhaps because BTC is starting to overheat:

„This weekend we looked at the sustainability of $BTC above $13,000. At the moment, our on-chain and social media parameters are showing more worrying signs than encouraging ones.
Unlike the 2017 bull run, BTC’s current rise has been more sustainable. It has established a large number of important levels of support and resilience, reducing the likelihood of a huge correction.

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