Bitcoin May Plunge to $40K: Key Metric Signals Potential Downward Trend

Bitcoin, the world’s leading cryptocurrency, has faced significant volatility following the recent downturn in Japan’s stock market.

This instability has sparked concerns that Bitcoin could experience a further price drop, possibly reaching $40,000.

A key metric contributing to this bearish outlook is the Net Unrealized Profit/Loss (NUPL) indicator, which tracks the market sentiment by measuring the unrealized profits and losses of Bitcoin holders.

Understanding the NUPL Metric and Its Implications

The NUPL metric is a valuable tool for gauging investor sentiment. When the NUPL is high, it indicates that many investors are in profit, which can lead to increased selling pressure as they take profits.

Conversely, a low NUPL suggests that the majority of market participants are at a loss, potentially encouraging further buying and a bullish sentiment.

Will the bears seize control of the market?

“The NUPL metric is currently positioned near a critical level. Historically, the 0.4 level has served as a significant point of support and resistance.” – By @GrizzlyBTClover

Read more 👇https://t.co/Q0Nuwu6Xz8 pic.twitter.com/sePvAvWg44

— CryptoQuant.com (@cryptoquant_com) August 15, 2024

Currently, the NUPL is approaching the critical 0.4 level—a historical support and resistance point.

According to analyst Grizzly, who has been closely monitoring Bitcoin’s price action, a drop below this level could signal the onset of a significant bearish trend.

Should this occur, Grizzly predicts that Bitcoin could fall to around $40,000 in the short term.

However, he also notes that the current downward momentum isn’t strong enough to definitively end the ongoing upward trend.

Bitcoin’s Recent Rebound Offers Hope

Despite the bearish outlook, Bitcoin has shown signs of resilience. The cryptocurrency recently rebounded from $56,632 to $58,531, though it remains down by over 3% in the past week.

While the overall market sentiment is bearish, there is still optimism among investors, as indicated by a 6% increase in daily trading volume.

In CT, recent discussions are drawing parallels between the current #BTC drop and the "coronadump" of 2020.

The sentiment among some traders is that the worst is behind us, and the market may now be poised for recovery.

Additionally, the Relative Strength Index (RSI)… pic.twitter.com/3YhPhAaRSU

— Sky_Run 🔶 (@Cryptoskyrun) August 10, 2024

Grizzly’s analysis serves as a cautionary note for investors, highlighting the potential for price instability soon.

While a drop to $40,000 is possible, the recent recovery and increased trading activity suggest that Bitcoin still has room for potential gains.

Investors should closely monitor the NUPL metric and other market indicators to navigate the coming weeks.