Current analysis of the Bitcoin market indicates that the short-term holder cost basis remains a key metric for market health.
The Role of Short-Term Holder Cost Basis
The short-term holder cost basis (STH) represents the average purchase price of investors who acquired Bitcoin within the last 155 days. This group is highly reactive to price changes, often driving volatility during rallies and corrections.
Analysis shared by ZYN indicates Bitcoin remains above this metric, suggesting stable market conditions. Unlike previous cycles, current deviations are modest, pointing to a healthier growth phase.
Standard Deviation Bands as Support and Resistance
The cost basis is tracked with standard deviation bands, which act as dynamic support and resistance levels during market cycles. Approaching the upper band signals overheating, while movement toward the lower band reflects fear-driven conditions.
During the 2021 rally, a push beyond the upper band preceded a notable correction, showcasing its effectiveness as a market signal. Currently, the STH cost basis is estimated in the mid-$50,000 range.
On-Chain and Volume Correlations
On-chain data from providers like Glassnode indicates that when the cost basis nears the lower deviation band, realized losses often peak. This usually corresponds to weak holders leaving the market, followed by renewed accumulation phases.
Trading volumes add confirmation during these periods. Elevated exchange activity, particularly in BTC/USD pairs, suggests capitulation events, leading to stability and price recovery.
Current metrics suggest that the Bitcoin market remains in a balanced phase, despite volatility. Insights from the short-term holder cost basis and trading volumes provide valuable signals for traders and analysts.
