Bitcoin Faces Key Level as Rally Attempts a Comeback
Bitcoin is currently facing a crucial level that it needs to surpass in order for its recent rally to truly make a comeback. According to on-chain data, the cryptocurrency must conquer this level to continue its upward momentum.
Analyst Root recently shared a chart that reveals Bitcoin’s price is retesting the short-term holders’ cost basis or the realized price. The realized price measures the average price at which Bitcoin investors acquired their coins. When the spot price is trading above this indicator, holders are in a state of profit, while trading below indicates a market loss.
The realized price can be defined for specific segments, and in this case, it applies to short-term holders (STHs) – those who purchased their coins less than 155 days ago. Their average cost basis should lie within the price range of the past five months.
Historically, the STH cost basis has been significant for Bitcoin. Breaks above the level often signal bullish momentum, while falls below it indicate bearish sentiment. Additionally, the level has acted as both support during rallies and resistance during bearish periods.
This pattern could be attributed to investor psychology. During rallies, if the spot price drops to the STH cost basis, investors may view it as an opportunity to buy more at a profitable level. This buying pressure provides support for Bitcoin. On the other hand, in bear markets, STHs aim to break even and quickly sell their holdings, leading to resistance.
It remains to be seen whether Bitcoin can break above the STH realized price and maintain that position. Reclaiming the line would be an optimistic sign for the cryptocurrency, as it enjoyed support at this level during the rally earlier this year.
Currently, Bitcoin is trading at around $27,400, representing a 4% increase in the past week. However, it has lost much of its recovery, indicating the importance of surpassing the STH realized price.
In conclusion, Bitcoin’s ability to conquer the STH realized price will determine the sustainability of its recent rally. Investors will closely monitor whether the cryptocurrency can make a successful comeback and maintain a favorable position.
