Ethereum On-Chain Analysis: NUPL and MVRV Reach Critical Levels

In this article, Bitcoin Magazine will look at Ethereum (ETH) on-chain metrics, more specifically Net Unrealized Profit/Loss (NUPL) and Market Value to Realized Value (MVRV).

NUPL

NUPL was created to determine the total gain or loss from the movement of a coin. To determine this, each coin in circulation is equalized the difference between the current price and the price when it last moved.

Values ​​above zero indicate that the realized profit is higher than the realized loss, while the opposite is true for values ​​below zero.

Historically, values ​​above 0.75 indicate a top, while values ​​below 0.25 indicate a bottom.

The indicator hit a yearly high of 0.77 in January (black circle), a signal that the market has overheated.

It then dropped twice below the 0.5 threshold (red circle), which at that time was considered a sign of weakness, as it showed that the uptrend had weakened.

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Prior to that, a drop below 0.5 (black circle) marked the end of the bull cycle. Therefore, it is important for the indicator to hold above this level.

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MVRV

MVRV is the ratio between the market capitalization and actual capitalization of a coin. Simply put, an MVRV value of 3 means that the market cap is three times larger than the actual capitalization.

A reading at a high can be seen as a sign of a top, indicating that the market is overbought. Similarly, a low reading can be seen as a sign of a bottom, indicating that the market is oversold.

Historically, the 1.9 level seems to have acted as support for ETH. This was the case for July and September 2017, as both the price and the indicator bounced after hitting a low near 1.9 (black circle). Therefore, this value is associated with a local bottom before ETH resumes its uptrend.

This level also acted as resistance in August 2020, before turning into support (black line). There was a significant deviation in July 2021, but the indicator retraced this level shortly after.

Currently, MVRV is trading just above this level and is likely to create a bounce.

Similar to 0.5 in NUPL, 1.9 in MVRV is critical. Therefore, the indicator must hold above this level for ETH’s uptrend to remain intact.

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