On-chain data shows the Bitcoin short-term holder cost basis has now risen to $25,300; here’s what this tells us about the market.
Bitcoin Short-Term Holder Cost Basis Has Gone Up Recently
According to data from the on-chain analytics firm Glassnode, the average acquisition price of the short-term holders continues to approach the spot price. The relevant indicator here is the “realized price,” a metric derived from the “realized cap.”
The realized price is a capitalization model for Bitcoin that puts each coin’s “real” value in the circulating supply as the price at which it was last moved on the blockchain, rather than the current spot price as the normal market cap does.
The realized price is obtained when this cap is divided by the total number of coins in circulation. Since the realized cap accounted for the investors’ cost basis (the price at which they bought their coins), the realized cap signifies the value at which the average investor in the market acquired their BTC.
The realized price can also be defined explicitly for only parts of the market. Generally, BTC investors are divided into two main groups: the “short-term holders” (STHs) and the “long-term holders” (LTHs).
The STHs include all investors holding onto their coins since less than 155 days ago, while the LTHs have those holding since more than that threshold amount.
Now, here is a chart that shows the trend in the Bitcoin realized price for the entire market, as well as the versions of the metric for the STHs and LTHs, over the last few years:
The cost basis of the different segments of the market | Source: Glassnode on Twitter
As displayed in the above graph, the Bitcoin realized price (for the total market) is around $20,100 currently, meaning that the average investor bought their coins at this price.
The market’s realized price has held historical significance for the asset, acting as the transition mark between the bear market lows and bullish periods throughout the cycles. Generally, during bear markets, this level has acted as resistance, while during bulls, it has supported the price.
This level is unrelated to the spot price because it is an important psychological point for investors. As it’s the price they bought at, holders would prefer to sell at this price during bear markets to avoid losses.
In full-blown bull rallies, however, Bitcoin investors would see this level as a preferable point to accumulate more, thus explaining why it may act as support in such periods instead.
Similarly, the cost basis of the STHs and LTHs has also acted as resistance and support. The various interactions of the STHs’ realized price are most prominently visible during the 2021 bull run in the chart.
The STH realized price has also increased as the current rally has continued. This is normal behavior seen during uptrends in the price, as the STHs include only the investors who bought most recently. Since the most recent spot prices would be going up in such periods, the cost basis of the group would also naturally go up as fresh holders join them.
This level is around $25,300, close to the spot price. It will be interesting to see how the spot price may interact with this line if BTC observes some extended downtrend soon. Such a retest would be a positive sign if successful, as this behavior would align with historical bull markets.
BTC Price
At the time of writing, Bitcoin is trading around $28,200, down 1% in the last week.
BTC has surged today | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, Glassnode.com