In a not-so-surprising turn of events, the Bitcoin price’s bearish orientation has continued into the month of December, suggesting that the leading cryptocurrency could end the year in the red. Interestingly, recent on-chain data has offered insights into Bitcoin’s likely direction, based on the integrity of a key price level.
Cost basis for active market participants at $82,000
In a December 5 post on the X platform, market analyst Burak Kesmeci said shared an interesting look at the direction of the Bitcoin price.
The analyst revealed that anything that happens around $82,000 could impact or disrupt Bitcoin’s trajectory in the short term. To demonstrate why this price region is so important, Kesmeci pointed out that it appears to be the convergence point of two very influential cost bases in Bitcoin history.
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Kesmeci revealed that Bitcoin spot exchange-traded funds have an average purchase cost of around $82,000. Since ETFs are one of Bitcoin’s strongest sources of demand, tracking their average cost basis values could be a good means of determining where the market stands institutionally.
The crypto expert also referenced the Bitcoin True Market Mean metric, which monitors the cost at which active investors acquired their holdings – excluding mined or rarely moved BTC. Particularly in the current market cycle, Bitcoin’s active participants typically purchased their coins around a value of $82,000.
What happens if $82,000 fails?
When the price falls below the major price support, there is typically an increase in overall selling pressure as buy-side liquidity is converted into bearish momentum via losses suffered by investors. Therefore, in the scenario where the $82,000 does not hold, a wave of bearish pressure is expected to arise as Bitcoin’s active investors try to cut their losses.
However, Kesmeci expects something more specific to follow. According to historical data, Bitcoin often falls further down when Bitcoin falls below the cost basis of the active market participants, as if targeting its realized price.
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Currently, the Bitcoin Realized Price is around $56,000 – a price level significantly lower than the average cost basis of investors. Kesmeci therefore warned that a drop below $82,000 could precede Bitcoin’s sharp decline towards $56,000.
This would represent a drop of almost 40% from current price levels. At the time of writing, BTC’s price stands at around $89,310, reflecting a decline of more than 3% in the past 24 hours.
Featured image from iStock, chart from TradingView