How short-term holders keep Bitcoin price stable but constrained

Bitcoin has maintained a tight trading range between $28,000 and $30,000 since April 2023, a prolonged sideways movement that has been a rarity in the market. One of the reasons for this squeezed price range, especially after BTC dropped below $30,000, is price support created by short-term holders.

Short-term holders are entities that have held Bitcoin for a relatively brief period, typically less than 155 days. Their behavior is crucial in analyzing Bitcoin’s performance as they often react more quickly to market changes, thereby influencing price movements.

Data from Glassnode showed that Bitcoin’s price has traded above the realized price for short-term holders since June 19. The realized price is a metric that calculates the average price at which all Bitcoins were last transacted. It represents the average cost of Bitcoin for all users at any point in time, providing a sense of the market’s cost basis.

As of Aug. 8, the on-chain cost basis for short-term holders is $28,462. This means that all of the addresses on the Bitcoin network that have acquired their coins in the past 155 days have bought them at an average price of $28,462.

Since the beginning of the year, Bitcoin’s price traded below the short-term holder realized price only twice — from Jan. 1 to Jan. 11 and from June 9 to June 19. These brief dips below the realized price underscore the resilience of Bitcoin’s support level.

The heightened sell pressure from short-term holders, evident from their increased activity on exchanges, is also a potential contributing factor to Bitcoin’s sustained sideways movement. There has been a notable increase in the volume of BTC short-term holders in profit who have sent their holdings to exchanges in August.

An increase in Bitcoin transfers to exchanges indicates a readiness to sell, which can create a supply glut, keeping the price from moving upward.

The behavior of short-term holders has created a solid support level for Bitcoin’s price, but it also contributes to the current sideways movement. The balance between buying at an average price and the readiness to sell has created a unique market condition where Bitcoin’s price has been stable yet constrained.

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