On-chain data shows that another Bitcoin cross has formed and has proven to be quite profitable for the cryptocurrency.
Bitcoin Realized Price of Short-Term Holders Overtakes Long-Term Holders
As an analyst in a CryptoQuant after explained, the realized price of the holders of 1 to 3 months is slightly higher than that of the investors of 6 to 12 months.
The “realized price” here refers to a metric derived from the “realized limit”, which is a capitalization model for Bitcoin that assumes that the true value of a coin is the price at which it last traded on the blockchain in instead of the current BTC price as says the usual market cap.
The realized price is obtained when the realized limit is divided by the total number of coins in circulation. Since the realized limit represented the prices at which the investors bought their coins (their “cost basis”), the realized price represents the average purchase price in the market.
This means that when the Bitcoin price drops below this benchmark, the average investor in cryptocurrency assets is left at a loss. Similarly, a break above implies a transition to profit for the average investor.
In the context of the current discussion, the realized price of three specific segments of the market is relevant; the holders who bought between 1 month and 3 months ago, 3 months and 6 months ago, and 6 months and 12 months ago.
The first two of these are part of the “short-term holders” (STH) cohort, while the third is part of the “long-term holders” (LTH) group. Here is a chart showing the trend in Bitcoin realized price specific to these segments of the market:
Looks like two of these metrics have come together in recent days | Source: CryptoQuant
As shown in the chart above, an interesting pattern formed during the lead up to the 2021 bull run. First, the realized price of the 1 to 3 month cohort was higher than that of the 6 to 12 month group. After this crossover, BTC saw a sharp uptrend, but it didn’t last long.
As this price increase waned, the 3-6 month segment also edged above this LTH cohort. These crossovers implied new buys in the market as the rally built. As prices rose during this initial period, STHs had to buy at increasingly higher prices, driving up their realized price and eventually exceeding that of LTHs.
After these crossovers were completed, the BTC bull run increased. Recently, the first of these crossovers seem to be forming again, as the realized price of the 1 month 3 month band is now equal to that of the 6 month to 12 month band.
While it’s uncertain whether the second crossover will take shape now, Bitcoin could see at least some bullish momentum from just this first crossover (assuming it’s not just a fake), as it did in 2020.
BTC price
At the time of writing, Bitcoin is trading around $29,800, up 1% over the past week.
BTC has seen rapid increase in the past day | Source: BTCUSD on TradingView
Featured image by Dylan Leagh on Unsplash.com, charts from TradingView.com, CryptoQuant.com
