The indicator is built on Cryptoquant’s Profit and Loss (P&L) Index, which aggregates three key onchain metrics, namely the Market Value to Realized Value (MVRV) ratio, the Net Unrealized Profit and Loss (NUPL), and a comparison of Long-Term Holder and Short-Term Holder Spent Output Profit Ratios (LTH/STH SOPR). When the P&L Index climbs above its 365-day moving average, the indicator flips green. When it falls below, it turns red.
Despite the positive signal, Cryptoquant was careful to flag a caveat. In March 2022, the same indicator flashed green before price quickly rejected the move and continued lower, eventually bottoming out with the FTX collapse in November of that year. That false signal is why analysts say Tuesday’s read should be treated as a data point to watch, not a guaranteed green light.
