Bitcoin’s price has struggled lately to generate enough demand to push itself higher. Especially as bearish sentiment continued to dominate.
However, there may be a changing dynamic among short-term investors. These could affect Bitcoin’s [BTC] trajectory, especially if a bullish scenario occurs in the short term.
Bitcoin to $64,000 could trigger bulls
Data from CryptoQuant highlighted short-term holders’ cost basis – the average price at which they bought Bitcoin – and revealed a potential market pattern.
STHs who purchased in the last month have an average cost basis of approximately $85,450. At Bitcoin’s current price, this represents an unrealized loss of 19% – a significant pullback.
Historically, when the STH cost basis falls to 25% or lower, it often marks a market bottom. With a 19% loss, Bitcoin would need another 6% drop – bringing it to roughly $64,000 – before conditions for a recovery could emerge.
At these levels, two behaviors typically occur: some STHs hold longer, while others sell and are unable to sustain further losses. For Bitcoin to reach an all-time low and potentially repeat previous fractal patterns, selling of the latter group is usually required.
Basis for a rally
There may also be signs of a fundamental shift developing. In fact, some short-term holders are already taking actions that could tighten Bitcoin’s supply dynamics.
At the time of writing, reports from CryptoQuant indicated an ongoing transition from STHs to LTHs – generally positive for Bitcoin. Long-term holders, investors who have held Bitcoin for at least six months, tend to reduce the chance of a sudden sell-off.
In fact, approximately 300,000 BTC were recently moved from STHs to LTHs, amounting to a removal of approximately $27 billion from the liquid market.
This reduced supply can support price stability, especially during downtrends, as LTHs are less likely to sell under pressure.
The dynamics of exchange reserves
Another critical metric is the availability of Bitcoin on exchanges, reflected in foreign exchange reserves. High reserves can increase selling pressure as more Bitcoin is readily available for trading.
At the time of writing, foreign exchange reserves stood at 2.45 million BTC, down slightly from the high of 2.46 million on April 2.
A continued decline in foreign exchange reserves would indicate tighter supply, which could reduce the risk of large price falls. Nevertheless, the dynamics of the exchange will remain crucial for an eventual return to levels historically associated with market bottoms.
Final summary
- Short-term holders are suffering an unrealized loss of 19% and a further 6% decline could push Bitcoin to levels historically associated with market bottoms.
- More than 300,000 BTC previously held by STHs have not yet been transferred to long-term holders.