Examination of the behavior of Bitcoin holders in the short term

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The following is taken from a recent edition of Deep Dive, Bitcoin Magazine’s high-end market newsletter. To be among the first to receive this and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Relevant Articles:

Daily Dive # 070 – Base Ratio of Short Term: Long Term Cost

Daily Dive # 083 – Bitcoin All Time High

The Daily Dive # 081 – HODLer Engineered Supply Squeeze

In previous daily dives, we looked at long-term and short-term holder supply dynamics and what this means for the bitcoin market. Today we will take a closer look at short-term holder dynamics during bull and bear markets.

Before you begin, it’s important to define some terminology for those who may not be familiar.

In this article, when we refer to the cost base, we are referring to the realized price, which uses the price at which the coins were last transferred on the Bitcoin blockchain. Due to the transparent nature of Bitcoin’s ledger, we can quantify a cost base of various cohorts of holders. Below are some other terms and abbreviations that will be mentioned frequently in today’s Daily Dive.

Cost base = realized price

MVRV = Market value (price) / realized price ratio

LTH = Long-term holder

STH = Short-term holder

Let’s dig.

Short-term Hodler cost analysis

For more information on the quantification of short / long term holders, click here

The photo below represents the cost basis for short term holders over time:

Source: Glassnode

It is clear that STH’s cost base hovers around the price of bitcoin, but upon further analysis, bull markets are dragged down by new capital flowing into the market and as a result the price will far exceed STH. because the new money will bid competitively for the allowances. Take a look at the trends between the STH cost base and price since the start of 2020, as well as the bull market of 2017.

Source: Glassnode

Source: Glassnode

We can display the same value as a ratio using STH MVRV (ratio of short-term holder market value to realized value). Notice how 1.0 acts as support for STH MVRV in bull markets?

This can be seen as new entrants aggressively defending their average cost base, while continuing to build up position size.

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