Bitcoin’s price falls below $29,000; potential support levels for BTC.

Bitcoin's price falls below $29,000; potential support levels for BTC.

An Essential Support Level: Bitcoin Short-Term Holder Realized Price

Bitcoin, the world’s largest cryptocurrency, has seen a sharp decline in its price recently, dropping below the $29,000 level. However, there is a significant level of support that could potentially prevent further price declines. According to on-chain data and analysis, the realized price of short-term holders (STHs) at $28,000 is a crucial level to watch.

To understand the significance of this realized price, we need to delve into the concept of cost basis. The realized price is the average buying price of Bitcoin for the average investor in the market. When the asset’s price falls below this level, it signifies that more than 50% of investors are in a loss-making position. Conversely, a price above the realized price suggests that the overall market is in a state of profit.

It’s important to note that the realized price we’re discussing here pertains specifically to short-term holders. These are investors who have acquired Bitcoin within the last six months. Examining the historical trend of the average cost basis for this cohort provides valuable insights:

Historical trend of the STHs’ realized price

Analyzing this chart, we can observe interesting interactions between the STHs’ realized price and the spot price of Bitcoin, particularly during bullish periods. These interactions are highlighted in the graph above. During rallies, the price has generally remained above the realized price, with the realized price acting as a support level for the asset.

This pattern was evident during the rally of the past year as well. Both during the March and June price drawdowns, Bitcoin rebounded when it retraced to the STH realized price. Psychologically, investors perceive their cost basis as an advantageous buying opportunity during bullish periods, anticipating further price increases. Consequently, when the asset returns to its cost basis in such periods, investors often accumulate more Bitcoin.

The extraordinary buying pressure exerted at the STH realized price level potentially explains why Bitcoin finds support here. Conversely, during bearish periods, the same level can act as a resistance as investors begin considering their acquisition price as an attractive selling opportunity.

At present, the Bitcoin spot price is once again approaching the STH realized price, which currently stands at $28,000. This level could potentially serve as a turning point for Bitcoin, halting its recent downward trend. However, it should be noted that if the realized price of short-term holders fails to hold, it may signal the end of the ongoing bull market.

BTC Price

As of the time of writing, Bitcoin is trading around $28,900, representing a 1% decline in the last week.

BTCUSD chart showing recent decline in price

In conclusion, the realized price of short-term holders is a critical level to watch in the Bitcoin market. Understanding the dynamics between the STH realized price and the spot price allows us to gauge potential support and resistance levels during bullish and bearish periods. As Bitcoin approaches the STH realized price once again, its performance in relation to this level will be crucial in determining the future direction of the cryptocurrency.

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