Bitcoin has shown signs of weakness in recent days as it struggles to maintain its rally. Analysts are closely watching a critical level that the cryptocurrency needs to conquer if it wants to regain momentum in the market. This level is known as the short-term holders’ cost basis or the realized price. In this article, we will delve into the significance of this level and its impact on Bitcoin’s price movements.
The short-term holders (STHs) are investors who have purchased Bitcoin within the last 155 days. The realized price for this group measures the average price at which these investors acquired their coins. When the spot price of Bitcoin is trading above the STH realized price, it indicates that these holders are currently in a state of profit. On the other hand, if the spot price falls below this metric, it implies that the market is facing losses.
The STH cost basis has played a significant role in Bitcoin’s price movements in the past. Breaking above this level has often signaled a bullish trend, while dropping below it has resulted in bearish momentum. Moreover, this level has acted as both support during rallies and resistance in bearish periods. This peculiar pattern can be attributed to investor psychology.
During rallies, if the spot price of Bitcoin drops to the STH cost basis, short-term holders may perceive it as an opportunity to buy more at a profitable price. This buying pressure from STHs could provide support to the cryptocurrency. Conversely, bear markets create fear among STHs, prompting them to sell and exit as soon as they can break even. This selling pressure from STHs contributes to the resistance faced by Bitcoin.
In the recent rally, Bitcoin briefly surpassed the STH realized price but subsequently pulled back below it. Speculation arises regarding whether Bitcoin will make another attempt to break above this level and if it does, whether it can sustain that position for an extended period. Reclaiming the STH realized price would be an optimistic sign for the cryptocurrency, as it had enjoyed support at this level during the first half of the year.
Bitcoin is currently trading at around $27,400, showing a 4% increase in the last week. However, the cryptocurrency faces a crucial challenge as it attempts to conquer the STH realized price. This level has historical significance and could act as both support and resistance to Bitcoin’s price movements. The outcome of this battle will determine the future trajectory of the cryptocurrency and whether the rally can sustain its momentum. Investors and analysts eagerly await to see if Bitcoin can overcome this key level in the coming days.