Bitcoin (BTC) would have to return below $20,000 to reset a key metric that covers speculative profit-taking, data shows.
In the latest issue of their weekly newsletter, “the week in chain”, analysis firm Glassnode revealed that short-term holders (STH) may be dictating BTC price resilience.
Profit taking reinforces resistance levels
As BTC/USD rose to $25,000, STHs (those who held coins for 155 days or less) began to see substantial returns on their investments.
This was captured by the Market Value to Realized Value (MVRV) metric, which compares Bitcoin’s market capitalization to the value of coins moved on-chain.
“By comparing these two metrics, MVRV can be used to get an idea of when the price is above or below ‘fair value’ and to assess market profitability,” Glassnode explains in an accompanying document. guide.
MVRV passed 1.2 en route to multi-month highs, coinciding with $23,800 appearing as a BTC price resistance area.
As Glassnode writes, “the chance for STH to make a profit tends to grow during periods when the average STH is more than 20% in-the-money, returning an STH-MVRV greater than 1.2.”
“The recent rejection at the $23,800 level resonates with this structure, as STH-MVRV reached as high as 1.2 before stalling out,” he continued this week.
“If the market returns to $19.3k, it would return STH-MVRV to the value of 1.0 and indicate that spot prices have returned to the cost basis of this cohort of new buyers.”
$19,300 would thus form a kind of magnetic target in terms of profitability and incentive not to sell STH.
As Cointelegraph reported, Glassnode is not the only one suggesting that $20,000 may not be support for BTC/USD, and that a new local low could form below that line in the sand.
Bitcoin in “transition phase”
Meanwhile, also in Glassnode’s sights are long-term holder cost base (LTH) and whale activities invested in Bitcoin since the end of its last bear market in late 2018.
Related: BTC Price ‘In The Cutoff Zone’: 5 Things To Know About Bitcoin This Week
The realized price of the so-called “old” supply, the price it last moved at as a whole, currently sits at $23,500, further reinforcing the area as a key battleground.
On the downside, Bitcoin’s combined realized price is at $19,800, again fueling the idea that this zone could finally form support.
“Bitcoin economics often reacts not only to levels widely observed in traditional technical analysis, but also to the psychological cost basis levels of various on-chain investor cohorts. This is true not only with respect to their realized price, but also with respect to the degree of profit and loss they have within their offer,” Glassnode concluded.
“From this point of view, the market currently resides in a transition phase, constrained above by the realized price of the oldest offer and also by the average whale that has been active since the trough of the 2018 cycle.”
BTC/USD was trading at $22,400 at the time of writing on March 7, according to data from Cointelegraph Markets Pro and TradingView.
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