Amid the recent Bitcoin price struggle, CryptoQuant's head of research revealed the level to which Bitcoin can potentially go.
Bitcoin could go as low as the price realized by 1-3 month old hands
In a new article on “To evaluate this, I like to look at the realized price of 1-3 month holders,” says Moreno.
“Realized price” refers to an indicator that essentially tells us the average price at which investors in the Bitcoin market acquired their coins. This metric uses on-chain data to find the cost basis of holders, assuming that the last transfer of a coin into circulation occurred when the coin changed hands.
When the cryptocurrency spot price is higher than the realized price, it means that investors as a whole are currently making unrealized gains. On the other hand, the price being below the measurement suggests that the overall market is underwater.
Naturally, when the realized price and the spot price are exactly equal, it can be assumed that the average industry investor is just breaking even on their investment.
In the context of the current topic, Moreno did not apply the realized price to the entire user base, but rather to a single segment of investors: 1-3 month old holders.
The chart below shows the realized price trend of Bitcoin for this particular group of holders over the past year:
The trend in the realized price of this short-term holder segment | Source: jjcmoreno on X
Investors aged 1-3 months are part of the broader cohort of “short-term holders” (STH). STHs are defined as investors who purchased their coins within the last 155 days.
Therefore, holders who purchased between 1 and 3 months ago would be part of the youngest part of this group. In general, STHs behave ficklely, reacting to any significant changes in the market, such as a rally or crash.
The more mature a holder's coins become, the less likely the investor is to exhibit such a reaction. Since 1-3 month old hands, while not the youngest, are still young STHs, they are likely to respond to price changes.
According to Moreno, the realized price of these STHs has “represented a support level historically and over the course of 2023.” The reason behind this sustained level is likely because these investors are closely monitoring their average cost basis and decide to buy more when the price drops to this level if the overall market mood is bullish.
When the prevailing Bitcoin trend is bearish, the level may instead act as resistance, as these STHs would be willing to exit the market at their break-even point.
Currently, the realized price of 1-3 month old STH is $36,700. Given the historical trend, it is possible that Bitcoin could fall to this level before finding support, if the current correction continues for long.
Since the asset's price plunged below the $45,000 level a few days ago, Bitcoin price has been trading sideways around the $42,500 level.
Looks like the price of the coin has been moving sideways recently | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, charts from TradingView.com, CryptoQuant.com
Disclaimer: The article is provided for educational purposes only. It does not represent the views of NewsBTC on whether to buy, sell or hold investments and, naturally, investing involves risks. You are advised to carry out your own research before making any investment decision. Use the information provided on this website entirely at your own risk.