Bitcoin price set to rise by more than 700%, suggests crucial on-chain metric

Bitcoin has seen a decrease in its upward momentum, especially since its recent crash that caused liquidations worth more than $2.3 billion. While the crash might be bearish in the short term, it will not hinder BTC’s performance in the long run.

The flagship cryptocurrency has witnessed a monumental surge of over 300% in 2020 and a whopping 77% increase from its previous all-time high of roughly $19,700. While prices seem to have peaked at nearly $35,000, a particular on-chain metric suggests that BTC has more room to go up.

Bitcoin’s NUPL show further gains on the horizon

The net unrealized profit/loss indicator is an on-chain metric that considers investors’ holdings against the price at which the asset was last purchased or moved. Also known as NUPL, this gauge helps understand investors’ sentiment and investments, thereby determining if the market is undervalued or overvalued.

Bitcoin Net Unrealized Profit/Loss 

At the time of writing, the NUPL indicator hovers at a value of 0.6936, suggesting that the cryptocurrency enthusiasts are in a state of “belief.” Following such a stage in the psychology of a market cycle comes the euphoria phase. This is characterized by a period of parabolic growth that tends to lead to market tops.

Interestingly, the last time NUPL reached a value of 0.69 was during the 2017 bull run when BTC was hovering in the $2,000-range. Soon after that, the pioneer cryptocurrency saw its price surge by nearly 7x to hit a peak of $19,666 on December 17, 2017.

If history were to repeat itself, Bitcoin price could mirror its previous performance, translating into a market value of $235,000 per token.

BTC’s foray into the six-digit territory: True or false?

While a $235,000 Bitcoin may seem infeasible, several fundamental factors support such exponential growth. 

1. Unlike the bull run of 2017, Bitcoin has received many positive comments from high net worth individuals this time around. Institutional investors have been adding BTC to their balance sheets to hedge against inflation. Some of the most prominent billionaires, such as Paul Tudor Jones, believe this cryptocurrency will reach a market value of at least $100,000 during the on-going bullish cycle. 
2. Thus far, institutions have acquired roughly 6% of Bitcoin’s total circulating supply, which comes at more than 1.15 million tokens. As the buying pressure behind BTC skyrockets, there are fewer coins to sell, drastically decreasing the downward pressure. Such supply shock will likely reflect on prices.
3. The stock-to-flow model, which has accurately predicted the Bitcoin price over the years, indicates that by mid-2021, the bellwether cryptocurrency will surpass $100,000.
4. Pandemic-induced lockdowns have caused worsening macroeconomic conditions around the world. This has also caused massive printing of US dollars leading to rampant inflation. Hence, anybody holding vast fiat reserves will be forced to find alternative yet relatively stable sources, which happens to be Bitcoin at the moment.
5. Other on-chain indicators also hint at more than $200,000 per Bitcoin by the end of the year.

These factors hypothesize the need for BTC as an investment vehicle, not just for retail but also for institutional investors. Hence, the inflow of capital into the cryptocurrency market adds credence to the NUPL indicator, and it isn’t far-fetched for a $200,000 Bitcoin.