As reported by the analytics company Alphractal, metrics concerning the cost basis of long-term Bitcoin holders indicate that the ongoing market correction is diverging from the typical patterns observed in previous bear markets.
Alphractal’s evaluation focuses on the realized price alongside the standard deviation bands for Bitcoin Long-Term Holders (LTH).
During the bear market of 2022, Bitcoin’s price plummeted to the -0.2 standard deviation mark of this measure. At that time, the LTH MVRV ratio fell below 1, leading to unrealized losses for long-term investors as a whole.
Historically, levels like these have been linked to significant bear markets, mass investor exits from the market, and extended periods of accumulation.
In contrast, Alphractal notes that Bitcoin did not fall back to the realized price of long-term investors during the latest bear market correction. Instead, it only dropped to about the +0.5 standard deviation band, where it found strong support, keeping the price above the cost floor for long-term investors.
“In essence, while the 2022 low dipped beneath the overall cost basis for long-term holders, the recent correction remained well above that threshold.”
The insights from Alphractal indicate that the current market cycle might be distinct from past trends.
Is a New Market Phase Taking Shape for Bitcoin?
This analysis suggests the possibility that Bitcoin might navigate through this cycle without dipping below the cost basis for long-term investors. Should this happen, it would represent the first significant Bitcoin cycle that lacks periods of unrealized losses for these investors.
“If Bitcoin manages to finish this cycle without breaching that level, it could signify the first major Bitcoin cycle in which long-term holders do not face total unrealized losses on-chain.”
Conversely, Alphractal also notes that the realized price might increase over time. The ongoing trading of Bitcoins and the influx of new investors into the long-term holder demographic could reduce the disparity between market price and cost basis without leading to a substantial downturn.
At this juncture, Alphractal cautions that the absence of this phase does not imply the conclusion of the bear market, and it remains premature to assert that $BTC has broken free from its historical bearish trends.
*This is not investment advice.