The Net Realized Profit/Loss Index is calculated by subtracting the Realized Loss from the Realized Profit.
Realized Profit and Realized Loss are the actual profits and losses that are calculated based on the price of BTC of its last transaction compared to the current price of BTC. If the last traded price is higher than the current price, BTC is found to undergo a loss. In contrast, if the last traded price is lower than the current price, BTC is seen to experience a profit.
Based on the calculation of Net Realized Profit/Loss, we can identify when BTC investors cut losses at a low price after a strong BTC price collapse by searching for the sign of the indicator’s strong rebound happening when BTC price is in a sideways trend.
As long as investors cut losses, the BTC undergoing losses are sold at a very low BTC price. Therefore, when BTC only needs to increase slightly in a sideways pattern, those already sold BTC will then experience profits. This would therefore make the value of subtraction between the Realized Profit and the Realized Loss.
Currently this index has recovered from being very negative to the mean value at the black horizontal line while the BTC price is still in a sideways pattern. This proves that BTC investors are cutting losses.
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