Three Indicators tell you when to buy and sell cryptocurrencies
On what basis would professional investors invest?
Professional investors combine on-chain and market data to create indicators that signal before the change in prices, and they're called an indicator.
What would be the most popular indicator in CryptoQuant?
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Check 3 indicators that have been viewed the most:
1. MVRV (Market Value to Realized Value)
An indicator to determine bubble by projecting realized cap
Long-term holders hold Bitcoins long enough until the price meets their expectations and sell them. When selling Bitcoins, the transaction is made to other wallets through OTC deals or crypto exchanges, which can be considered revenue realization. Realized Cap is the sum of all these transactions being made in Bitcoins.
When there is a gap between Realized Cap and Market Cap, the MVRV number will increase, which can also be interpreted as unrealized profit or loss is increasing, and the asset is overly valued. Vice versa, when the MVRV number decreases, which can also be interpreted as unrealized profit or loss is decreasing.
Generally, MVRV above 3.7 is considered overvalued, and below 1 is considered as undervalued.
2. NUPL (Net Unrealized Profit/Loss)
An indicator to determine the amount of unrealized profit/loss
NUPL uses Realized Cap to show the ratio of Unrealized Profit/Loss. If there is an increase in Unrealized Profit in blockchain, the probability of price drop increases. Vice versa, if there is an increase in Unrealized Loss in blockchain, the probability of price rise increases.
Generally, in the long term, NUPL above 0.75 is considered overvalued, and below 0 is considered undervalued.
3. LTH-SOPR(Long-term Holder Spent Output Profit Ratio)
An indicator to capture long-term holder's investment
Bitcoin trading is like using a check. Let's say John needs to give Jane $100. When John gives Jane $100 by using a $1K check, Jane receives a $1K check from John, creates a $900 check and $100 check from a $1K check, and returns a $900 check to John. $1K check will be disposed of. This kind of check system in Bitcoin is called UTXO(Unspent Transaction Output).
LTH-SOPR is an indicator of how much profit/loss is generated from UTXOs that have not been used for over 155 days. If the profit is greater using the UTXO(check), the LTH-SOPR value increases, and vice versa for the loss.
Generally, LTH-SOPR above 13 is considered long-term holders are making a profit, and below 1 is considered long-term holders are making a loss.
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