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.
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