Mar 07, 2023
Bitcoin Needs to Drop Below $20K to Reset Profit-Taking Metric
As Bitcoin (BTC) continues to surge, data suggests that short-term holders (STHs) may be dictating the current price resistance. This is according to the market value to realized value (MVRV) metric, which compares the Bitcoin market cap to the value of coins moved on-chain.
In its weekly newsletter “The Week On-Chain”, analytics firm Glassnode revealed that when BTC/USD climbed toward $25,000, STHs — those holding coins for 155 days or less — began taking profits. The MVRV metric passed 1.2 on the way to multimonth highs, coinciding with $23,800 appearing as an area of BTC price resistance.
Glassnode explains that “the possibility of STHs taking profits tends to grow during periods where the average STH is 20%+ in money, returning a STH-MVRV above 1.2.” In other words, if BTC/USD returns to $19,300, it would bring STH-MVRV back to the value of 1.0, indicating that spot prices have returned to the cost basis of this cohort of new buyers.
At the same time, Glassnode is also focusing on the long-term holder (LTH) cost basis and the activities of whales invested in Bitcoin since the end of its last bear market in late 2018. The realized price of the so-called “old” supply — the price at which it last moved on aggregate — currently sits at $23,500, further reinforcing this area as a key battleground.
Glassnode concluded that “the Bitcoin economy often reacts not only to levels widely observed in traditional technical analysis but also the psychological cost basis levels of various investor cohorts printed on-chain. This takes place not only with respect to their realized price but also regarding the degree of profit and loss held within their supply.”
As BTC/USD traded at $22,400 at the time of writing on March 7, according to data from Cointelegraph Markets Pro and TradingView, it appears that the market is currently in a transitional phase, bounded above by the Realized Price of Older Supply and also by the average Whale that has been active since the 2018 cycle bottom.
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