Cost base, long-term owners and the cyclical bottom

In this month Bitcoin Monthly, ARK Invest focused on Ethereum and the Merge. As a side dish, they published some premium and review-worthy stats that we’re about to cover. Never mind the market, the Bitcoin network continues to produce block after block regardless. However, the statistics that all this activity produces can be crucial to understanding the market.

This is where ARK Invest’s The Bitcoin Monthly comes in. The publication defines itself as “an ‘earnings report’ that describes activity on the chain and shows the openness, transparency and availability of blockchain data. So the data we’re about to cover is the reason for The Bitcoin Monthly.”

Bitcoin Monthly: 200-Week Moving Average and Investor Cost Basis

• “After closing above its 200-week moving average in July, the price of 1 bitcoin reversed and fell below it in August. Currently at $22,680, the 200-week moving average now appears to be resistance.”

The center could not hold. The price rise was short-lived. Markets are red across the board, and bitcoin is no exception. At the time of writing, bitcoin is trading at $19,874. For those keeping score, that’s just below last cycle’s all-time high of $20K. Something that shouldn’t happen, but a few degrees of error is always understandable.

• “Bitcoin is currently trading above investor cost basis at $19,360, its strongest level of support on the chain (…) Importantly, throughout bitcoin’s history, trading at investor price usually marks a bottoming process.”

Times are tough, but bitcoin still trades above investor cost basis. Bitcoin Monthly clarifies: “The investor price is calculated by subtracting the cost base of miners from the general cost base of the market.” The way we see it, The Bitcoin Monthly is calling the bottom. They didn’t say it in those exact words, but they certainly insinuated it.

Is the bottom really in?

BTC price chart for 09/17/2022 on Gemini | Source: BTC/USD on TradingView.com

Bitcoin Monthly: Short-Term Holder vs. Long-term holder

• “The short-term holder (STH) cost basis is approaching the long-term holder (LTH) cost basis – an event that has marked cyclical bottoms of late. (…) Since the end of July, the difference between short- and long-term holders’ cost basis has shrunk from $5,840 to $2500”

Bitcoin Monthly sees it as a sign that “the market usually capitulates and shifts back to long-term participation.” Bitcoin’s consolidation process may soon end. However, we could stay in the bottom area for a while. It has happened before. The bottom line is that all the indicators The Bitcoin Monthly highlighted this month point in the same direction. To the bottom.

• “The supply held by long-term bitcoin holders is 34,500 coins away from reaching 13.55 million – its all-time high. Long-term owner supply makes up 70.6% of total outstanding supply.

This is the most bullish of all the highlighted statistics. To clarify, coins that have not moved for 155 days or more qualify as “long-term holder supply.” The tourists and people with high hopes left long ago. And the lion’s share of the bitcoin supply is now in the possession of the true believers. A remarkable situation that is not mentioned enough.

About Ethereum Merge

• “In August, ether outperformed bitcoin by 7.6% (…) Historically, ether has outperformed bitcoin during ‘risk-off’ bull markets and underperformed during ‘risk-off’ bear markets.”

The merger’s effects affected the market throughout the story. Although we are in a “risk-off bear market”, ETH took over and led the market for a while there. They achieved the mythical feat and … the market turned against them. After what seemed like mission accomplished, ETH’s price began to bleed.

Hidden behind a secret door, that’s what The Bitcoin Monthly contained.

Featured Image by Maxim Hopman on Unsplash  | Charts by TradingView