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On-chain data shows that the real price for short-term Bitcoin holders is at $86,800 at the moment, making the first level worth monitoring.
Bitcoin remains in a noticeable gap from its short-term holder cost basis
In new mail On X, on-chain analytics firm Glassnode discussed the trend in the profit and loss situation for Bitcoin holders in the short term. The relevant indicator here is the “Market Capitalization to Realized Value Ratio (MVRV),” which tracks the ratio between BTC’s market capitalization and its realized value.
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“Maximum Realized” here refers to the on-chain capitalization model of cryptocurrency that assumes that the “true” value of each token in circulation is the price it was last transacted on the blockchain.
Since the last conversion of any currency is likely to correspond to the last instance in which it changed hands, the price at that time can be taken as the current cost basis. Therefore, the maximum achieved is nothing but the sum of capital used by investors as a whole to purchase the cryptocurrency.
In contrast, market capitalization represents the value that stockholders currently hold. Since the MVRV ratio compares these two models, its value tells us about the profit and loss status of the network.
The traditional MVRV ratio measures this for the entire market, but the version of the measure of interest in the current topic is the one reserved for short-term token holders (STHs), i.e. investors who have purchased their coins within the past 155 days.
Below is the chart shared by the analytics company that shows the trend in Bitcoin STH MVRV ratio over the past year or so:
As shown in the chart, the Bitcoin STH MVRV ratio rose to notable levels above the 1 mark when the recent surge in BTC’s rally occurred. The index being higher than this value indicates that the market value of the group is greater than the realized value, and therefore the average member is in profit.
Recently, with a decline in the price of the cryptocurrency, the indicator naturally declined. Its value is still above Level 1, though, indicating that the profits retained by the group still outweigh the losses.
At present, the STH MVRV ratio is 1.08, which corresponds to the group holding an unrealized gain of about 8%. Historically, STHs have shown to represent the volatile side of the market that easily engages in sell-offs, so making big profits has tended to be a red flag for the price.
The group is no longer making significant profits after the drawdown, but a slowdown period may be needed if the risk of profit taking is to go away. A metric that makes it easy to track when this could happen is the “realized price”, which is derived from the maximum achieved by dividing it by the total number of tokens in circulation.
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From the chart, it appears that the realized price of STH is worth $86,800 at the moment, meaning the group will break even on its investment if Bitcoin drops to that level.
Bitcoin price
Bitcoin briefly fell below the $92,000 level yesterday, but the coin has found a slight recovery with its price now trading around $94,500.
Featured image from Dall-E, Glassnode.com, chart from TradingView.com