Research: Withdrawal Price – A New Way to Value Bitcoin

[ad_1]

Assessing the health of the crypto market requires looking at more than the price of Bitcoin.

Examining the percentage of bitcoin holders who are making a profit, meaning they bought BTC at a price below its current spot price, is a strong indicator of future moves.

Holders who have seen their BTC increase in value are more likely to sell, which could cause the market to turn around. Those whose holdings have depreciated are more likely to hold on to their assets, leading to buying pressure.

Called the realized price, this measure has always been a solid but not infallible indicator of market movements.

Another way to approach realized price is to focus on trade pullbacks. Namely, examining the average price at which Bitcoin was removed from exchanges provides a much more reliable estimate of a market-wide cost basis for BTC.

CryptoSlate’s analysis looked at the average withdrawal prices for each year from 2017 to 2023 and the average withdrawal price from 2011 to 2022.

Graph showing the average exchange withdrawal price for Bitcoin by year (Source: Glassnode)

Data from Glassnode showed a curve of the average Bitcoin withdrawal price, ranging from $15,139 to $37,232.

2017 = $15,139 2018 = $18,598 2019 = $21,817 2020 = $26,513 2021 = $37,232 2022 = $26,564 2023 = $19,496

The average Bitcoin withdrawal price from 2011 to 2023 is $11,037.

Graph showing the average exchange withdrawal price for Bitcoin by year (Source: Glassnode)

When Bitcoin reached $23,000, it broke through several cost basis levels, including realized price and realized short-term holder. The long-awaited but slow recovery has now put investors who bought BTC before the COVID-19 pandemic into profit.

However, those who bought BTC during the 2020 pandemic, in 2021 and in 2022 saw their positions lose value. Investors who bought the dip in early January 2023 have already made profits as the price of Bitcoin continued to rise throughout the month.

The average withdrawal price becomes even more important when analyzed alongside long-term holders.

Defined as those who have owned BTC for more than 155 days, long-term holders are less likely to spend their coins. The realized price at which they bought BTC has historically served as a strong resistance indicator. However, the average withdrawal price for long-term holders might be a better indicator of resistance, as it represents the average value at which they transferred their coins from exchanges to wallets.

Chart showing total loss supply held by long-term holders from 2011 to 2023 (Source: Glassnode)

At the end of 2022, the market saw total loss supply held by long-term holders hit an all-time high. And although the number has dropped from 6 million BTC to 5 million BTC since the beginning of the year, it still shows a significant part of the supply at a loss.

This indicates that long-term holders may continue to sit on the 5 million BTC until their realized price is reached, creating strong resistance that may prevent Bitcoin from sliding below its 2022 low.

Posted in: Bitcoin, Research

[ad_2]