Bitcoin Bear Market Over? This historic signal on the chain suggests so
A Bitcoin on-chain pattern that signaled the end of the bear market during the last three instances has formed again recently.
Bitcoin short-term holder Realized price is now above that of long-term holders
As pointed out by an analyst on Twitter, the asset may be in the middle of a transition from a bull market to a bear market. The relevant indicator here is “realized price”, which is a value derived from the realized rate.
This realized rate is a capitalization model for Bitcoin that states that each circulating coin’s value is not the current BTC price, but actually the value at which it was last transferred to the blockchain.
When this model is divided by the total number of coins in circulation, the aforementioned “realized price” is obtained. Since the realized cap represented the prices at which the coins were last purchased, i.e. the holders’ cost basis, the realized price represents the acquisition price or cost basis of the average investor in the market.
This realized price covers the entire market, but the calculation can also be defined for only parts of the user base. In particular, the realized prices of “long-term holders” (LTH) and “short-term holders” (STH) are of interest here.
These two groups of holders form the two main cohorts into which the Bitcoin market can be divided. The STHs include investors who have held their coins since less than 155 days ago, while the LTHs include those who have held since more than this threshold amount.
Now, here is a chart showing the trend in the realized prices of these two BTC cohorts over the past few months:
Looks like the two metrics have crossed each other in recent days | Source: James V. Straten on Twitter
As shown in the graph above, the Bitcoin realized price for the entire market, as well as for the STHs and LTHs, was above the normal price just before the rally started in January.
This means that the average investor in all parts of the market was in a losing position then. However, with the rally, the price quickly crossed all three of these prices, suggesting that these investors were back in profit.
Lately, as the price rise has continued, the market has started to see a shift in the various realized prices. From the chart, it is clear that the metric’s value for the LTHs has dropped below that of the STHs very recently.
This means that the cost basis of the LTHs is now below the STHs. This is the first time since May 2019 that this type of shift has occurred in the Bitcoin market.
“This has happened three times in the past, and each time it has signaled the end of a bear market,” explains the analyst. It now remains to be seen whether this historic signal holds true this time as well.
At the time of writing, Bitcoin is trading around $27,900, up 1% in the past week.
BTC has moved sideways recently | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Glassnode.com