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On-chain data shows the Price Made for short-term Bitcoin holders currently sits at $86,800, making the level one to watch.
Bitcoin Is Still in a Significant Gap From the Short-Term Owner Cost Basis
In a new post on X, the on-chain analytics company Glassnode discussed the tendency of short-term Bitcoin holders to lose profits. The relevance indicator here is the “Market Value to Realized Value (MVRV) Ratio,” which tracks the ratio between BTC’s Market Cap and Realized Cap.
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“Realized Cap” here refers to the on-chain model of capitalization of a cryptocurrency that takes the ‘real’ value of each token in circulation as the price at which it was last traded on the blockchain.
Since the last transfer of any coin is likely to coincide with the last time it changes hands, the price at that time may be considered the basis of its current cost. Therefore, Realized Cap is nothing, but the total amount of money investors have spent to buy cryptocurrency.
In contrast, Market Cap represents the value that owners currently own. Since the MVRV Ratio compares these two types, its value tells us about the profitability of the network.
The standard MVRV ratio measures this across the market, but the version of the metric that is of interest to the current topic is the one specific to short-term holders (STHs), investors who bought their coins in the last 155 days.
Below is a chart shared by the analytics company that shows the trend in the Bitcoin STH MVRV Ratio over the past year or so:
As shown in the graph, the Bitcoin STH MVRV ratio rose to significant levels above the 1 mark when the latest leg of the BTC rally took place. An index above this value means that the group’s Market Cap is greater than its Raised Cap, therefore, the average member is in a profitable position.
Recently, as the price of cryptocurrency has fallen, the index has naturally fallen. Its value remains above the level of 1, however, suggesting that the gains held by the group still outweigh the losses.
Currently, the STH MVRV Ratio sits at 1.08, which is consistent with the group holding an unrealized dividend yield of around 8%. Historically, STHs have shown to represent a volatile side of the market that easily participates in selloffs, so their presence in large gains is often a dangerous signal for the price.
The team is no longer profitable after the relegation, but it may be necessary to calm down if the risk of taking profits is to end. The metric that makes it easy to track when this happens is the “Realized Price,” which is derived from the Realized Cap by dividing it by the total number of tokens in circulation.
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From the chart, it can be seen that the STH Price is currently valued at $86,800, which means the group will be breaking even on their investment if Bitcoin falls to this level.
BTC price
Bitcoin briefly fell below the $92,000 level yesterday, but the coin has experienced a small rebound as its price is now trading around $94,500.
Featured image from Dall-E, Glassnode.com, chart from TradingView.com