This key metric correlates with Bitcoin’s largest price drops |

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Bitcoin is the most volatile cryptocurrency in existence, but new research shows that one particular price indicator can tell us when it’s likely to drop significantly. This key metric correlates with Bitcoin’s largest price drops.

The “bitcoin price” is a key metric that correlates with Bitcoin’s largest price drops. This metric tracks the value of Bitcoins in USD over time, and it has been on a downward trend since 2013.

This key metric correlates with Bitcoin’s largest price drops |

This key metric correlates with Bitcoin’s largest price drops |

In a market-wide flash collapse at the start of the month, Bitcoin fell to a three-month low of $46,500, wiping off nearly 18 percent of its value in a matter of hours.

A rise in an often-overlooked statistic foreshadowed both this month’s fall and last year’s March sell-off, according to a research from analytics firm Santiment, and might be used to anticipate future price swings.

Following the return on investment (ROI) of Bitcoin transactions shows an intriguing trend.

The recent collapse of Bitcoin has thrown the whole crypto market into disarray, driving practically every token into the negative. The dramatic 18 percent price drop generated some short-term fear among selling and even managed to damage long-term holders’ trust.

When examining at Bitcoin’s Network Realized Profit/Loss (NPL) chart, an often neglected indicator that records the overall ROI of all daily Bitcoin transactions, the anxiety, uncertainty, and doubt were most evident.

To create the indicator, Santiment assumes that the purchase price of each unit of Bitcoin that travels on the blockchain is the same as the price at which it last moved. This is assumed to be the selling price after the unit moves addresses again.

The difference between the purchase and sale prices indicates whether coins are being “sold” at a profit or at a loss on the blockchain.

This key metric correlates with Bitcoin’s largest price drops |Graph depicting Bitcoin’s Network Realized Profit/Loss over the last six months (Source: Sanbase)

The slump this month caused one of the greatest dips in Bitcoin’s NPL, implying that a considerable number of BTC was traded at a loss over the weekend.

While a single spike on a chart isn’t enough to be regarded a reliable forecast of market mood, a similar drop happened during Bitcoin’s May downturn. The drop in Bitcoin’s NPL at the time, according to Santiment, indicated broad surrender and escalating fear among “weak hands.”

This key metric correlates with Bitcoin’s largest price drops |Graph depicting Bitcoin’s Network Realized Profit/Loss over the last 6 years (Source: Sanbase)

“Overall, a big reduction in Bitcoin’s NPL might be symptomatic of increased FUD among certain BTC investors, who are making movements in anticipation of a further fall,” according to Santiment’s study.

This key metric correlates with Bitcoin’s largest price drops |

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This key metric correlates with Bitcoin’s largest price drops |

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Emilia James
By Emilia James

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