On-chain data shows Bitcoin is retesting a historically significant support level following the asset’s latest price drop.
Bitcoin is currently retesting the price realized by short-term holders
As explained by CryptoQuant Community Manager Maartunn in a new publish at X, BTC returned to the Realized Price of short-term holders with its relegation.
O “Realized Price” here refers to an on-chain indicator that, in short, tracks the acquisition price or cost basis of the average investor in the Bitcoin sector.
When the value of this metric is higher than the spot price of the cryptocurrency, holders are in a state of net unrealized loss at this point. On the other hand, being below the asset value implies profit dominance in the market.
In the context of the current discussion, the Realized Price of the entire market is not of interest, but only of a segment of it: the short-term holders (STHs). STHs include all investors who purchased their BTC in the last 155 days.
Now, here is a chart showing the trend of Bitcoin’s realized price specifically for STHs over the past month:
The chart above shows that Bitcoin’s spot price has fallen towards the STH realized price at its last halving. This would mean that STH’s breakeven point is now being tested again.
Historically, this retest has proven to be quite important for the cryptocurrency. The line has served as a transition boundary between periods of bearishness and bullishness.
Typically, when the asset is above the realized price STH, further testing of the indicator leads to a reversal. Similarly, the line acts as resistance when the currency is below it. The explanation behind this curious pattern may lie in investor psychology.
STHs are the fickle hands of the market, easily reacting to asset movements. As such, they are naturally sensitive to retests of their cost basis and can take action when these occur.
When the mood in the sector is bullish, STHs often look at their cost basis as a buying opportunity. This is why the level acts as support during bullish periods. In times of bearish sentiment, these investors may panic and sell at the breakeven point, thus providing resistance to the asset.
Bitcoin spot price managed to break through this resistance earlier this month, but with the decline, it is now being tested again. It remains to be seen whether the support holds here, confirming the prevalence of a bullish mindset, or whether a dip below it occurs, thus suggesting a transition into a bear market.
BTC Price
At the time of writing, Bitcoin is trading around $64,800, down more than 2% in the past 24 hours.