Bitcoin has suffered another pullback in the past day that has brought the price to the short-term holder cost basis, a level that has served as support thus far.
Bitcoin conducts another test of the price realized by STH
As explained by CryptoQuant community analyst Maartunn in a new after at X, Bitcoin could be in the fourth step of the Short-Term Holder (STH) Realized Price cycle.
The “Realized Price” here refers to an indicator that measures the average cost basis of the investors on the BTC network. When the value of this measure is greater than the spot price, it means that the overall market is experiencing a net unrealized loss. On the other hand, the fact that the price is below the value of BTC indicates that the average holder is in the green.
In the context of the current topic, the Realized Price of only a specific segment of investors is of interest: the STHs. These are the BTC holders who purchased their coins in the last 155 days. This group is believed to include the industry’s fickle group, who are prone to panic attacks during volatile periods.
Here is the chart shared by Maartunn showing the trend in the Bitcoin Realized Price of the STHs over the past few months:
As visible in the chart above, Bitcoin has conducted a number of retests of the STH Realized Price in recent weeks and each time the level has been maintained thus far. The reason behind the indicator acting as support lies in the way investor psychology usually works.
As the analyst pointed out in the chart, STHs typically follow a five-step cycle during bullish phases. The first three steps involve some level of purchasing from the group, after their cost base has been retested from the top down. These holders view returns to their breakeven levels as dip buying opportunities.
However, on the fourth retest they may become exhausted and decide to stop their accumulation. This is when the level stops providing support to the cryptocurrency.
The chart shows that the latest pullback in Bitcoin has once again brought its value close to the STH Realized Price. Since this is the fourth retest, Maartunn has noted that this could possibly be the fourth step in the STH cycle.
It will now be interesting to see how the price of the asset develops in the coming days. A sustained move below the level could confirm the breakdown of support and lead to the fifth and final step of the STH cycle, in which these investors begin to view their breakeven level as an opportunity to exit the market, turning what was once support into resistance.
BTC price
Bitcoin fell to $110,000 earlier in the day, but the coin has since bounced back to $113,000.