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On-chain data shows that the underlying value of 1-3-month Bitcoin investors has continued to support the price of late.
Bitcoin bounces off this support line again
As the analyst pointed out in a CryptoQuant post, if this line does not break, then BTC will be able to continue its bullish momentum. The relevant indicator here is the “realized price”, which is a metric derived from Bitcoin’s capitalization model called the realized cap.
Realized cap calculates the total value of a cryptocurrency, assuming that each individual coin in circulation is worth the same as the price it was last sold at (as opposed to market cap, which simply uses the current spot price for that purpose) .
When this model is divided by the total number of coins in circulation, the “realized price” appears. The meaning of this indicator is that it is the price at which the average investor in the market bought his coins.
Although this realized price refers to the whole market, the metric can also be defined for only a part of the sector. In the context of the current discussion, of interest is a group of investors who hold their coins from 1 to 3 months ago.
Here is a chart showing the Bitcoin realization price trend for this particular group:
The value of the metric seems to be growing in recent days | Source: CryptoQuant
The 1-3 month cohort is part of the “short-term holders” (STH) group, which is one of the two main divisions of the Bitcoin market. STH includes all investors holding their coins less than 155 days ago.
As shown in the chart above, the selling price of a 1-3 month group has been steadily increasing lately. This trend naturally makes sense as the price of the cryptocurrency has also risen in the same period.
Since these BTC investors only purchased their coins within the last 3 months, their underlying value will obviously follow the trend in the asset price, albeit with a slight lag.
What is interesting, however, is how the line interacts with price. The chart shows that the price of the cryptocurrency found resistance here while the bear market continued.
A likely reason for this pattern could be that these investors, who suffered losses in a bear market most of the time, engaged in massive selling whenever the price touched their average cost base (i.e., their realized price), as this may seem like an ideal opportunity to exit during such a period, since that way they can at least avoid losses.
However, since the start of this year’s rally, the pattern appears to have changed as the realized price of the 1-3 month cohort provided support for the asset.
It appears that these investors currently view their underlying value as a profitable buying opportunity as they likely believe the price will rise in the near future.
Right now, the realized price of this group is around $26,600, which is the level that Bitcoin bounced off yesterday. As the line still seems to be holding as support, this segment of the STH does not appear to have lost its bullish conviction yet.
At the time of writing, Bitcoin is trading around $27,300, down 1% over the past week.
BTC has hardly moved lately | Source: BTCUSD on TradingView