- BTC’s realized price of short-term holders was poised to fall below market value.
- Should this happen, BTC’s price might suffer a further drop in value.
In the current market cycle, an unabated drop in Bitcoin’s [BTC] realized price of its short-term holders put the leading cryptocurrency at risk of a further decline in value, pseudonymous CryptoQuant analyst Crazzyblockk noted in a new report.
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BTC’s realized price refers to the average price that all BTCs were last transacted on-chain. It is calculated by dividing the total value of all BTCs by the number of coins in circulation.
The metric is often deployed toward assessing the overall health of the BTC market.
Rising realized price indicates that investors are buying bitcoins at a higher price, which is a bullish signal. On the other hand, a falling realized price suggests that investors are selling bitcoins at a lower price, which is a bearish signal.
Short-term holders to determine the next price direction?
In its report, the analyst compared BTC’s realized price of short-term holders in the 2019-2020 price cycle and the current price cycle and found that when the realized price of short-term holders fell below the market price in the former cycle, the “maximum loss imposed on short-term holders of 1-6 months was about 40-45%.”
In the current price cycle, the realized price of short-term holders remains above the market price. But it was much closer to the market price than it was in the 2019 price cycle.
The analyst noted that this meant short-term holders are not at as much of a loss as they were in the 2019 price cycle. This was because losses incurred by this investor cohort only ranged from 4% to 9% at press time.
Read Bitcoin’s [BTC] Price Prediction 2023-2024
However, while current market conditions may not be as bearish as during the 2019 price cycle, the continued decline in the realized price of short-term holders puts them at risk of further losses. It also puts the general market at risk of suffering a further drop in the king coin’s price.
According to the analyst:
“For the current market conditions, it is necessary that even in the face of a further drop in the price of Bitcoin, this realized value should increase. (This) will indicate a double interest in holding Bitcoins besides short-term losses for longer terms.”
To avoid any “big price slump,” the analyst opined further:
“This average price, which is now flat, should take an upward slope (in) the coming months so that the dominance of Bitcoins held in the one year leads to support for maintaining the long-term bullish performance of Bitcoin.”