Bitcoin-on-chain data suggests that a historical support line may have helped the coin again as the asset recovered to $28,000 today.
Bitcoin Short-Term Holder Cost Basis may still be active as support
This is evident from data from the on-chain analytics company GlasnodeBTC price recently approached the cost basis of the short-term holders. The relevant indicator here is the ‘realized price’, a measure derived from the ‘realized limit’.
The realized limit refers to a capitalization model for Bitcoin that says the value of each coin in the circulating supply is not the current spot price, but the price at which it was last traded on the blockchain.
In this way, the model takes into account the price at which each investor bought their coins. That is, their “cost basis”. When the realized limit is divided by the number of coins in circulation (to find some kind of average value), the previously mentioned realized price emerges.
Related Reading: Bitcoin Exchange Inflows Coming Mainly From Loss Holders, Weak Hands Leaving?
This realized price indicates the average value at which each holder bought their coins in the market. The metric can also be defined for only part of the market segments, such as the “short-term holders” (STHs), in which case the indicator will tell us about the average cost base of only this group.
The STHs are all those investors who bought their coins less than 155 days ago. The BTC holders outside of this group are referred to as the “long-term holders” (LTHs).
Now, here is a chart showing the trend in Bitcoin realized price for the STHs over the past few years:
The value of the metric seems to have been climbing in recent days | Source: Glassnode on Twitter
In the chart above, Glassnode has highlighted the various instances where the realized price of Bitcoin STH has apparently interacted with the spot price of the asset. When the 2021 bull run peaked in November, the value of the cryptocurrency fell below this indicator, signaling a trend reversal.
From then on, as the bear market took over, the STH cost basis began to resist the asset. However, in January this year, the price finally managed to break through this resistance as the rally started.
Related Reading: Bitcoin Bulls Push BTC Back To $28K Amid Rising Address Activity
This break led to another shift in the broader trend as the line seemingly turned into support for the asset. However, this is not an unusual pattern as bullish periods have historically been seen to help the metric help the price.
Recently, Bitcoin struggled a bit, as the price dropped to the $26,000 level. The consolidation near this level meant that the price was rapidly approaching the STH realized price, which slowly moved upwards.
When Glassnode posted the chart yesterday, it described this current state as a “decision point” for the market. According to the analysis firm, a successful retest here would be a sign of strength in the bullish trend, while failure would imply weakness.
Over the past day, Bitcoin has seen an uptick, with the price briefly breaking above the $28,000 level. But it may not be a coincidence that the rise turned out well as the price approached a retest from this historic level.
Of course, a continued move away from the now realized STH price would confirm that the level is still active as support, a sign that would be positive for the durability of the rally.
BTC price
At the time of writing, Bitcoin is trading around $27,900, up 4% over the past week.
BTC has surged in the past day | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, Glassnode.com