Bitcoin Short-Term Holder Cost Basis Rises To $25.3k
On-chain data shows that Bitcoin’s short-term holder cost base has now increased to $25,300; here’s what that tells us about the market.
Bitcoin’s short-term holder cost base has increased recently
According to data from on-chain analytics firm glassnode, the average purchase price of short-term holders continues to approach the spot price. The relevant indicator here is “realized price”, a metric derived from “realized limit”.
Realized price is a compounding model for Bitcoin that puts the “true” value of each coin in the circulating supply as the price at which it was last moved on the blockchain, rather than the current spot price, as does the value of normal market.
The realized price is obtained when this limit is divided by the total number of coins in circulation. Since the realized cap represented investors’ cost basis (the price at which they bought their coins), the realized cap means the amount that the average investor in the market purchased their BTC for.
The realized price can also be set explicitly for market shares only. Generally, BTC investors are divided into two main groups: “short-term holders” (STHs) and “long-term holders” (LTHs).
STHs include all investors who have held their coins since less than 155 days ago, while LTHs have those who have held more than this cap value.
Now, here is a graph that shows the Bitcoin realized price trend for the entire market, as well as the metric versions for both 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 chart above, Bitcoin’s realized price (for the total market) is currently hovering around $20,100, which means that the average investor has bought his coins at this price.
The realized market price has historical significance for the asset, acting as the transition mark between bear market lows and bull periods throughout cycles. Generally, during bear markets, this level acted as resistance, while during bulls, it supported the price.
This level has nothing to do with the spot price because it is an important psychological point for investors. Since it’s the price they bought at, holders prefer to sell at that price during bear markets to avoid losses.
On bullish rallies, however, Bitcoin investors would see this level as a preferable point to accumulate more, thus explaining why it can act as support in such periods.
Likewise, the cost base of STHs and LTHs also acted as resistance and support. The various interactions of the realized price of STHs are most visible during the 2021 high on the chart.
The STH realized price also increased as the current rally continued. This is normal behavior seen during price uptrends, as the STHs only include investors who have bought most recently. As the latest spot prices would be rising in these periods, the group’s cost base would also naturally increase as new holders join them.
That level is around $25,300, close to the spot price. It will be interesting to see how the spot price might interact with this cross if BTC sees any extended downtrends any time soon. This retest would be a positive sign if successful, as this behavior would line up with historic bull markets.
BTC price
At the time of writing, Bitcoin is trading around $28,200, down 1% over the last week.
BTC has surged today | Source: BTCUSD on TradingView
Featured Image of Kanchanara from Unsplash.com, Charts from TradingView.com, Glassnode.com