Duel of fear and hope in the crypto market; Which direction will Bitcoin move?

Bitcoin price has been on a correction since hitting a local high of $28,580 on October 2. Since then, the bears have managed to reduce the price of this digital currency to the range of $26,500.

Meanwhile, the well-known Net Unrealized Profit/Loss (NUPL) indicator shows the ongoing battle between fear and optimism. Could the Bitcoin Risk Index, which has already reached new lows, finally keep the digital currency market in the bullish zone and start a new bullish rally?

NUPL index between the range of fear and optimism

NUPL index is an intra-chain measure that calculates the difference between relative unrealized profit and relative unrealized loss. The NUPL chart consists of five horizontal zones that are interpreted based on market psychology: from the red level for the surrender phase to the blue zone for euphoria and greed. Intermediate zones also have both a bullish and a bearish interpretation depending on whether the chart crosses the zone in a bullish or bearish market.

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Beginning

Currently, Bitcoin’s NUPL is in the yellow and relatively neutral zone at 0.26. At the same time, this indicator is close to the orange level of fear, which starts after falling below 0.25.

Recently, in the middle of January this year, this indicator was fixed at the lowest level of capitulation (surrender phase), but with the rapid recovery of the digital currency market, it again entered the zone of optimism. However, a deeper price correction and a test of the $20,000 zone could still push NUPL deeper into fear territory.

Short-term holders surrender!

In contrast, looking at the same index for short-term holders (STH), we see that new investors are still giving up. This version of the chart shows the brutal truth that most new investors are still at a loss.

However, _Checkmatey@_, a well-known analyst, has published a chart that may contain optimistic signals. Referring to the realized profit and loss related to short-term holders, he says:

The bears turned it negative in selling from $29,000 to $26,000. However, they failed to take it lower, despite the significant losses the market suffered (the most bearish since the FTX crash).

He says the indicator has turned green again, signaling a possible jump in P/L for short-term holders. Therefore, this analyst concludes that this situation could lead to two possible scenarios: the last profit-taking before a deep correction or a return of strength. Finally, he adds that he personally foresees the second scenario.

What does the low risk index of Bitcoin mean?

Finally, another on-chain data analyst, @Negentropic, recently published a Bitcoin Risk Index chart. According to his data, the price of Bitcoin today is in the low-risk blue zone and fluctuates in the zero range.

In his view, the measure suggests that a deeper downward move is “impossible at this point” after recent declines.

This interpretation is consistent with the fact that during the recent declines, the bears were unable to push the price of Bitcoin below $26,000. If this level is maintained and optimistic signals related to NUPL are confirmed, the digital currency market will soon experience a bullish return.

However, if the $26,000 area is missed, a deeper correction is likely.