This Bitcoin Support Line Is Still Active, Bullish Signal?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows the cost basis of the 1-3 months old Bitcoin investors has continued to provide support to the price recently.

Bitcoin Has Once Again Bounced Off This Support Line

As pointed out by an analyst in a CryptoQuant post, if this line doesn’t break, then BTC should be able to continue its bullish momentum. The relevant indicator here is the “realized price,” which is a metric derived from a Bitcoin capitalization model called the realized cap.

The realized cap calculates the total value of the cryptocurrency by assuming that each individual coin in the circulating supply is worth the same as the price at which it was last moved (which is unlike the market cap, which just uses the current spot price for this purpose).

When this model is divided by the total number of coins in circulation, the “realized price” emerges. The significance of this indicator is that it’s the price at which the average investor in the market bought their coins.

While this realized price is for the entire market, the metric can also be defined for only parts of the sector. In the context of the current discussion, the group of interest is the one with the investors who have been holding their coins since between 1 month and 3 months ago.

Here is a chart that shows the trend in the Bitcoin realized price for this particular group:

The value of the metric seems to have been going up in recent days | Source: CryptoQuant

The 1-3 months cohort is part of the “short-term holder” (STH) group, which is one of the two main divisions of the Bitcoin market. The STHs include all investors that have been holding onto their coins since less than 155 days ago.

As displayed in the above graph, the realized price of the 1-3 months group has been constantly going up recently. This trend naturally makes sense, as the price of the cryptocurrency has also been rising in the same period.

Since these BTC investors only acquired their coins within the last 3 months, their cost basis would obviously follow the trend in the asset’s price, albeit with a bit of lag.

What’s interesting, however, is the line’s interaction with the price. From the chart, it’s visible that the cryptocurrency’s price was finding resistance here while the bear market was going on.

The likely reason behind this pattern may have been that these investors, who would be in losses for the majority of the time in the bear market, would participate in mass selling whenever the price would touch their average cost basis (that is, their realized price), as it would appear as the ideal exit opportunity in such a period since they would at least be able to avoid losses that way.

Since the start of the rally this year, though, the pattern seems to have flipped, as the realized price of the 1-3 months cohort has been providing support to the asset.

It would appear that these investors are currently looking at their cost basis as a profitable buying opportunity since they probably believe that the price would go up in the near future.

Right now, the realized price of this group is around $26,600, which is the level that Bitcoin bounced off from yesterday. As the line still seems to be holding as support, this segment of the STHs looks to have not lost their bullish conviction yet.

BTC Price

At the time of writing, Bitcoin is trading around $27,300, down 1% in the last week.

BTC hasn't moved much lately | Source: BTCUSD on TradingView

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