On-chain data shows that the cost basis of the 1-3 month old Bitcoin investors has continued to support the price recently.
Bitcoin has once again bounced off this support line
As noted by an analyst in a CryptoQuant afterIf this line does not break, BTC should be able to continue its bullish momentum. The relevant indicator here is the “realized price”, a unit of measurement derived from a Bitcoin capitalization model called the realized limit.
The realized limit calculates the total value of the cryptocurrency by assuming that each individual coin in the circulating supply is worth the same as the price at which it last moved (which is in contrast to the market cap, which uses only the current spot price for this ). goal).
When this model is divided by the total number of coins in circulation, the “realized price” emerges. The importance of this indicator is that it is the price at which the average investor in the market bought their coins.
Although this realized price applies to the entire market, the benchmark can also be defined for only parts of the sector. In the context of the current discussion, the group of interest is the one with the investors who owned their coins between 1 month and 3 months ago.
Here is a chart showing the trend in Bitcoin realized price for this particular group:
The value of the metric seems to have been going up in recent days | Source: CryptoQuant
The 1-3 month cohort is part of the “short term holders” (STH) group, one of the two main divisions of the Bitcoin market. The STHs include all investors who held their coins less than 155 days ago.
As shown in the chart above, the realized price of the 1-3 month group has been rising continuously lately. Of course, this trend makes sense since the price of the cryptocurrency has also increased over the same period.
Since these BTC investors only acquired their coins in the past 3 months, their cost base would obviously follow the trend in the asset’s price, albeit with a bit of a lag.
What is interesting, however, is the line’s interaction with the price. It can be seen from the chart that the price of the cryptocurrency found resistance here while the bear market was underway.
The likely reason behind this pattern may have been that these investors, who would incur losses most of the time in the bear market, would engage in mass selling when the price hit their average cost base (that is, their realized price). ), since it seems like the ideal exit opportunity in such a period, as they can at least avoid losses that way.
However, since the start of the rally this year, the pattern appears to have reversed as the realized price of the 1-3 month cohort provides support for the asset.
It appears that these investors are currently viewing their cost base as a profitable buying opportunity as they likely believe the price will rise in the near future.
Right now, this group’s realized price is around $26,600, the level Bitcoin bounced off of yesterday. As the line still seems to hold as support, this segment of the STHs does not seem to have lost their bullish conviction just yet.
BTC price
At the time of writing, Bitcoin is trading around $27,300, down 1% over the past week.
BTC hasn't moved much lately | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com