Bitcoin short-term cost basis rises to $25.3k

Istanbul, Turkey – April 28, 2022: Human hand puts bitcoin in wallet

On-chain data shows that the cost basis for Bitcoin short-term holdings has now risen to $25,300; Here’s what this tells us about the market.

Bitcoin’s short-term holder cost basis has been rising lately

According to data from the analysis company at the chain Glass node, the average acquisition price of the short-term owners continues to approach the spot price. The relevant indicator here is “realized price”, a calculation derived from “realized ceiling”.

The realized price is a capitalization model for Bitcoin that sets each coin’s “real” value in the circulating supply as the price it was last moved to on the blockchain, rather than the current spot price as the normal market value does.

The realized price is obtained when this ceiling is divided by the total number of coins in circulation. Since the realized cap represented the investors’ cost basis (the price at which they bought their coins), the realized value means the value at which the average investor in the market bought their BTC.

The realized price can also be defined explicitly for only parts of the market. In general, BTC investors are divided into two main groups: “short-term holders” (STHs) and “long-term holders” (LTHs).

The STHs include all investors who have held their coins since less than 155 days ago, while the LTHs have those who have held more than the threshold amount.

Now, here’s a chart showing the trend of the realized Bitcoin price for the entire market, as well as the versions of the metric for the STHs and LTHs, over the last few years:

The cost basis of the different segments of the market | Source: Glassnode on Twitter

As shown in the graph above, the realized price of Bitcoin (for the total market) is around $20,100 at the moment, which means that the average investor bought their coins at this price.

The market’s realized price has had historical significance for the asset, acting as the transition mark between the bear market’s low and bullish periods throughout the cycles. Generally, during bear markets, this level has acted as resistance, while during bulls it has supported the price.

This level is not related to the spot price because it is an important psychological point for investors. Since that is the price at which they bought, holders will prefer to sell at this price during bear markets to avoid losses.

However, in full-fledged bull rallies, Bitcoin investors will see this level as a preferred point to accumulate more, thus explaining why it can act as support during such periods instead.

Correspondingly, the cost base of the STHs and LTHs has also acted as resistance and support. The various interactions between STH’s realized price are most prominently visible during the 2021 bull run in the chart.

The STH realized price has also increased as the current rally has continued. This is normal behavior seen during increases in price, as the STHs only include the investors who bought last. Since the latest spot prices will go up in such periods, the cost base for the group will naturally also go up as new owners join them.

This level is around $25,300, close to the spot price. It will be interesting to see how the spot price may interact with this line if BTC observes an extended downtrend soon. Such a retest would be a positive sign if successful, as this behavior would be in line with historical bull markets.

BTC price

At the time of writing, Bitcoin is trading around $28,200, down 1% in the last week.

BTC has surged today | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Glassnode.com