Bitcoin has seen the asset price fall below $67,000 over the past day. The historical support levels the asset may visit next are:
Bitcoin is now not far from short-term holder realized price.
As analyst James Van Straten pointed out in a post on
“Realized price” here refers to an on-chain metric that tracks the cost basis of the average investor in the BTC market. This indicator is based on the “realization limit” model of cryptocurrencies.
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If the spot price of an asset is higher than the realized price, this means the investor is currently holding on to some net unrealized profits. On the other hand, the value of the coin according to this indicator suggests that losses dominate the market.
In the context of the current topic, the realized prices of a specific sector segment, namely Short Term Holders (STH), are of interest. STH includes all investors who purchased the coin within the last 155 days.
Below is a chart showing the realized price trend of Bitcoin STH over the past few years.
As you can see in the graph above, the Bitcoin STH realized price surged during the rally towards its all-time high (ATH) earlier this year. This trend naturally makes sense because STH represents new investors in the market who need to buy at higher prices as assets rise, raising the average of the group.
After the consolidation phase of BTC after the March ATH, the upward trend of the indicator has slowed down, but its value is nevertheless increasing. After the latest increase, the metric reached $64,000.
What does the realized price of STH mean now? Historically, this indicator has alternated between serving as key support and resistance levels for cryptocurrencies.
During bullish periods, this indicator can promote the formation of bottoms in the cryptocurrency, keeping the cryptocurrency above itself, while during bearish trends, we usually witness a line that acts as a barrier preventing coins from escaping above it. A reversal beyond this level usually reflects a coin flipping trend.
This apparent pattern is likely to hold because relatively inexperienced STHs can be highly reactive. Cost bases are important to all investors, but this group is especially likely to be upset when their cost bases are retested.
When market sentiment is bullish, STH may believe that a price drop is just a “drop” opportunity and decide to buy more if the price falls to its average cost basis. However, in a bearish phase, these retests may be responded to by panic selling instead.
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The chart shows that Bitcoin found support around this line during the late April/early May selloff, potentially suggesting that bullish sentiment continues to dominate.
With BTC falling below $67,000 the previous day and STH realized price closing at $64,000, it will be interesting to see how this potential retest plays out this time.
BTC price
As of this writing, Bitcoin is trading at around $66,800, down more than 3% over the past week.
Dall-E, featured image from Glassnode.com, chart from TradingView.com