Bitcoin Shows Recovery: Did This Historical Line Act As Support Again?

Keshav Verma

2 years ago

3 mins read

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Bitcoin on-chain data suggests a historical support line may have helped the coin once again as the asset has recovered toward $28,000 today.

Bitcoin Short-Term Holder Cost Basis May Still Be Active As Support

According to data from the on-chain analytics firm Glassnode, the BTC price approached the cost basis of the short-term holders recently. The relevant indicator here is the “realized price,” which is a metric derived from the “realized cap.”

The realized cap refers to a capitalization model for Bitcoin that says that the value of each coin in the circulating supply is not the current spot price, but the price at which it was last transacted on the blockchain.

In this way, the model accounts for the price at which each investor acquired their coins. That is, their “cost basis.” When the realized cap is divided by the number of coins in circulation (to find a sort of average value), the aforementioned realized price emerges.

This realized price signifies the average value at which each holder in the market bought their coins. The metric can also be defined for only partial segments of the market, like the “short-term holders” (STHs), in which case, the indicator will tell us about the average cost basis among this group only.

The STHs are all those investors who bought their coins less than 155 days ago. The BTC holders outside this group are termed the “long-term holders” (LTHs).

Now, here is a chart that shows the trend in the Bitcoin realized price for the STHs over the past couple of years:

The value of the metric seems to have been climbing in recent days | Source: Glassnode on Twitter

In the above graph, Glassnode has marked the various instances where the Bitcoin STH realized price has apparently interacted with the spot price of the asset. Back when the 2021 bull run topped out in November, the cryptocurrency’s value dropped below this indicator, signaling a change of trend.

From this point on, as the bear market took over, the STH cost basis started providing resistance to the asset. Back in January of this year, though, the price finally managed to break through this resistance as the rally began to take place.

This break lead to another change in the wider trend, as the line seemingly turned into support for the asset. However, this isn’t an unusual pattern, as bullish periods have historically observed the metric helping the price.

Recently, Bitcoin found some struggle, as the price plunged towards the $26,000 level. The consolidation near this level meant that the price was fast approaching the STH realized price, which was slowly going up.

When Glassnode posted the chart yesterday, it described this current state as a “decision point” for the market. According to the analytics firm, a successful retest here would be a sign of strength in the bullish trend, while failure would imply weakness.

Over the past day, Bitcoin has enjoyed a rebound, with the price briefly breaking above the $28,000 level. But it may perhaps not be a coincidence that the uplift has come right as the price was nearing a retest of this historical level.

Naturally, a sustained move away from the STH realized price now would confirm that the level is still active as support, a sign that would be positive for the rally’s sustainability.

BTC Price

At the time of writing, Bitcoin is trading around $27,900, up 4% in the last week.

BTC has surged in the past day | Source: BTCUSD on TradingView

Featured image from iStock.com, charts from TradingView.com, Glassnode.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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