Bitcoin faced another retracement in the past day that brought its price to the short-term holder’s cost base, a level that has so far acted as support.
Bitcoin is taking yet another price test made by STH
As CryptoQuant community analyst Maartunn explained in a new post on X, Bitcoin may be in the fourth step of the short-term holder (STH) realized price cycle.
“Price Realized” here refers to an indicator that measures the average cost base of investors on the BTC network. When the value of this parameter is greater than the spot price, it means that the overall market is suffering a net unrealized loss. On the other hand, the fact that it is lower than the value of BTC suggests that the average holder is in the green.
In the context of the current topic, the realized price of only a specific segment of investors is of interest: STHs. These are BTC holders who have purchased their coins in the last 155 days. This group is believed to include the fickle group of the industry, prone to making panic moves during volatile times.
Now, here is the graph shared by Maartunn showing the movement of STH’s realized Bitcoin price over the last two months:
As can be seen in the chart above, Bitcoin has performed a few re-tests of the STH realized price in recent weeks and each time the level has held so far. The reason the indicator acts as support lies in the way investor psychology tends to work.
As the analyst analyzed the chart, STHs typically follow a five-step cycle during bullish phases. The first three steps involve some degree of purchasing by the group after reviewing the cost basis from above. These holders view retracements to the breakeven level as dip buying opportunities.
On the fourth retest, however, they may become exhausted and decide to stop accumulating. This is when the level stops providing support to the cryptocurrency.
From the chart, it is visible that Bitcoin’s latest retracement has once again brought its value close to the STH realized price. Since this is the fourth new test, Maartunn noted that this could potentially be the fourth step in the STH cycle.
It will now be interesting to see how the price of the asset develops in the coming days. A prolonged move below the level can confirm a breakout of support and lead to the fifth and final phase of the STH cycle, where these investors begin to view the breakeven level as an opportunity to exit the market, thus turning what was once support into resistance.
Bitcoin price
Bitcoin fell to $110,000 earlier in the day, but the coin has since rebounded to $113,000.