All the good things in life make you fat, they are immoral and they don’t last long, just like the bull market.
A message is circulating in the crypto world’s discussion forums indicatore on-chain which would seem to herald an important phase change in the current Bitcoin market cycle, with the possibility of a leap into the much feared bear market. The entire sector is still shaken by the price drops recorded in recent weeks, while investor sentiment highlights a widespread trend of gloomy pessimism mixed with uncertainty.
Some will object that everything still largely depends on the next macro implications, and we agree with you in this, but the metric in question has been particularly reliable in previous historical cycles, and it may not be wrong this time either. However, at the same time there is a well-known analyst, a certain Willy Woo, who tells us that there is still a possibility for Bitcoin and cryptocurrencies. Let’s see everything in this article.
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Ready for the bear market? The fun for Bitcoin is over
Table of Contents
The offending indicator is the “Bitcoin: Bull-Bear Market Cycle Indicator” developed by on-chain analytics firm CryptoQuant. This chart measures the difference over time between the P&L Index and its 365-day moving average, i.e average aggregate level of holders’ unrealized profits and losses. That is, it helps us understand whether at a given moment Bitcoin investors are making a profit overall or not (and by how much) compared to the purchase price.
Every time the metric falls below the value of 0, with a gradual transition from a situation of large latent profits, it means that we are most likely about to enter a phase of bear market. It worked very well at the beginning of 2014 and 2018, signaling the end of the bulls’ strength, and also between the end of 2021 and the beginning of 2022also getting the timing right. Now, as you can see, we are about to fall below that critical threshold again.
There have clearly also been false alarms in history, so come metric is not 100% flawlesssee the feint during the covid crash, the retracement of May 2021 and a couple of temporary drops in the last two years in September 2024 and April 2025. However, the indisputable fact remains that the P&L Index has weakened, and this also on a psychological level acts as a catalyst for a possible fall in prices.
Why is it important to calculate investors’ profits/losses?
For those who are not familiar with on-chain data, this may not be logical reasoning, but there is a historical (also important) relationship between the performance of the crypto market and the aggregate state of profits and losses of investors. Generally, when the majority of Bitcoin holders start to find their wallets in the black, optimism tends to grow in the air, pushing towards an increase in prices, at least until historically high earnings levels are reached that are too high to ignore.
Conversely, when the majority of participants see their profits disappear and fall into losses, the likelihood of capitulation increases. Here too, generally there is a tendency to decline progressively with the increase in selling pressure, until reaching a phase of exhaustion in which no one accepts selling at a loss anymore, and the market starts again.
Because of this he P&L Index (also called “NUPL” in other on-chain variants), it works as an emotional indicator, as well as a financial onethe state of the market. It helps us understand the level of confidence and risk aversion perceived by traders, which often offers a much more introspective insight than simply analyzing price action or other traditional metrics.
Willy Woo says Bitcoin and crypto still have a chance
According to the very interesting point of view of a famous pioneer of on-chain analysis on Bitcointhere is still hope to hold on to that feeds the idea of a possible “supercycleIn practice, Willy Woo rightly noted how the last bull runs in this bull market have been driven predominantly by derivatives marketswith strong volumes and large shares of open interest that prevailed over spot trading.
However, now that futures have suffered quite a bit of wear with the crash on October 10th which ferociously liquidated millions of traders, Woo notes that spot liquidity may finally take the lead. And this, according to him, would lead to a possible structural strength to seek a new, more organic rise, made by less aggressive operations from a speculative point of view.
Perps, Woo wisely reminds us, are tools where” you want to enter but not stay”as there are costs to be borne over time, aka funding rates, and conditions that discourage perpetual exposure. It is no coincidence that all futures in the traditional sense of the term have an expiry date, while we craziest people in the crypto world have found a way (with Bitmex in 2016) to bet potentially infinitely, with all the associated risks involved.
Growing spot volumes
It should be underlined in this regard that faced with yet another lesson inflicted on degen who love to lose money in the draft, the spot market is already grinding out excellent volumes in the last few weeks. Particularly after the local bottom in April, spot trading began to grow on almost all CEX up to the current level of around $650 billion weekly, almost on par with the November 2024 top.
In 2021, the increase in spot volumes was one of the largest drivers for price push and it could play a very important role in this round too. The more trades there are, the more there tends to be the will and interest to genuinely seek exposure, without exaggerating with leverage.
This is a fundamental data that we must keep under control: if volumes continue to grow in the coming months, exceeding the values of previous months, then we could prepare for another leg up, and why not, to enter into an unprecedented supercycle phase. We will keep you updated.
