As a seasoned researcher with extensive experience in the crypto market, I’ve witnessed firsthand how crucial on-chain data can be in understanding Bitcoin’s price dynamics. The recent dip in BTC‘s price and its retest of the short-term holder realized price is no exception.
As a crypto investor, I’m closely monitoring the on-chart data of Bitcoin‘s price movements. Recently, we experienced a significant drop in Bitcoin’s value. However, the encouraging sign is that this dip seems to be testing a historically robust support level once again.
Bitcoin Is Currently Retesting The Short-Term Holder Realized Price
According to Maartunn, the CryptoQuant community manager, Bitcoin (BTC) has recently dipped back down to the average price that short-term investors paid for their holdings, which is referred to as the “Realized Price.”
The “Realized Price” is a on-chain metric that monitors the typical purchase price or origin cost for the average Bitcoin investor within the market.
If the metric’s value surpasses the current price of the cryptocurrency, its holders are currently facing a net loss that hasn’t been realized yet. Conversely, if the value is lower than the asset’s price, those holding it have more profits dominating the market.
In our ongoing conversation, what matters is not the total Realized Price of the entire market, but rather that of a particular segment: the short-term holders (STHs). These are investors who have purchased Bitcoin within the last 155 days.
graph illustrating the recent development in the Bitcoin Realized Price for long-term holders (STHs) over the past month.
The graph indicates that the current Bitcoin market price is approaching the level of the STH Realized Price during this recent downturn. In other words, the cost basis for past Bitcoin transactions (STHs) is undergoing a reevaluation.
In the past, this retest has played a significant role in the history of cryptocurrencies. It has functioned as a pivotal point, separating bearish trends from bullish ones.
When an asset’s price surpasses its previous Realized Price (STH), there is a tendency for it to retest this level. During such retests, the price often reverses and moves back up. Conversely, when the coin’s price falls below the STH Realized Price, the indicator functions as resistance. This intriguing behavior might be attributed to investor psychology: once an asset breaks above a significant level like the STH Realized Price, investors may buy in, pushing the price higher; on the other hand, when the price dips below this level, sellers could panic and further drive down the price.
STHs, being the unpredictable agents of the market, swiftly respond to price fluctuations in an asset. Consequently, they exhibit a heightened sensitivity towards price levels that coincide with their initial investment costs. As a result, they are prone to making strategic moves once these levels are revisited.
During optimistic market conditions in a particular sector, Shorted-To-Cover (STH) investors often view their initial investment cost as a chance to buy more. This perspective makes their cost basis act as a supportive level during bullish trends. Conversely, when sentiments turn bearish, these investors may opt for selling at their break-even point in desperation. Such sales can create resistance to the asset price movement.
Earlier in the month, the Bitcoin spot price surpassed this resistance level. However, after a significant drop, it’s currently re-approaching this resistance. Whether this support holds and signals the continuation of bullish sentiment or if it gives way to a bearish trend remains uncertain.
BTC Price
Currently, Bitcoin is priced approximately at $64,800 during my composition of this text, representing a decline of over 2% in value within the previous 24-hour period.
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2024-07-26 08:10