Bitcoin (BTC) would need to return below $20,000 to reset a key metric which covers speculative profit-taking, data shows.
In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode revealed that short-term holders (STHs) may be dictating BTC price resistance.
Profit-taking reinforces resistance levels
As BTC/USD climbed towards $25,000, STHs — those holding coins for 155 days or less — began to see substantial returns on their investments.
This was captured by the market value to realized value (MVRV) metric, which compares the Bitcoin market cap to the value of coins moved on-chain.
“By comparing these two metrics, MVRV can be used to get a sense of when price is above or below ‘fair value,’ and to assess market profitability,” Glassnode explains in an accompanying guide.
MVRV passed 1.2 on the way to multi-month highs, coinciding with $23,800 appearing as an area of BTC price resistance.
As Glassnode writes, “the possibility of STHs taking profits tends to grow during periods where the average STH is 20%+ in money, returning a STH-MVRV above 1.2.”
“The recent rejection at the $23.8k level resonates with this structure, as the STH-MVRV hit a value of 1.2 before stalling,” it continued this week.
“Should the market return to $19.3k, it would bring STH-MVRV back to the value of 1.0, and indicate that spot prices have returned to the cost basis of this cohort of new buyers.”
Bitcoin STH-MVRV estimation annotated chart (screenshot). Source: Glassnode
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$19,300 would thus form something of a magnetic target in terms of profitability and incentive not to sell for STHs.
As Cointelegraph reported, Glassnode is not alone in suggesting that $20,000 may not hold as support for BTC/USD, and that a new local low could form beneath that line in the sand.
Bitcoin in "transitional phase"
Also in Glassnode’s crosshairs, meanwhile, are long-term holder (LTH) cost basis and the activities of whales invested in Bitcoin since the end of its last bear market in late 2018.
The realized price of the so-called “old” supply — the price at which it last moved on aggregate — currently sits at $23,500, further reinforcing the area as a key battleground.
To the downside, Bitcoin’s combined realized price is at $19,800, again feeding into the idea that this zone could ultimately form support.
“The Bitcoin economy often reacts not only to levels widely observed in traditional technical analysis but also the psychological cost basis levels of various investor cohorts printed on-chain. This takes place not only with respect to their realized price but also regarding the degree of profit and loss held within their supply,” Glassnode concluded.
“From this lens, the market currently resides in a transitional phase, bounded above by the Realized Price of Older Supply and also by the average Whale that has been active since the 2018 cycle bottom.”
BTC/USD traded at $22,400 at the time of writing on March 7, according to data from Cointelegraph Markets Pro and TradingView.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
