In the complex trends of the Bitcoin market, the changes in the average cost line of short-term holders (STH-RPC) related indicators are becoming an important window to glimpse the market trend. Since March 2024, the interaction between Bitcoin prices and STH-RPC has constructed two completely different market scenarios.
When the Bitcoin price reaches STH-RPC, the market diverges into two states. One, market selling pressure significantly decreases, many short-term new players are full of expectations for the future, and when the price approaches or falls below the cost, not only do they firmly hold their positions but also actively add to their positions, thus prompting a strong rebound in the market. Whenever STH-MVRV reaches 1, that is when the BTC price approaches STH-RPC, this position transforms into solid support, pushing the price upward.
Secondly, market sentiment falls into pessimism, and players lack confidence in future trends. When prices approach costs, they choose to sell and exit, causing Bitcoin prices to easily fall below the cost line. Even if there is a price rebound later, at STH-MVRV=1, it will encounter strong resistance, and the original support level transforms into a resistance level that suppresses the price. Once this situation occurs, it often indicates that the market will enter a 'phase bear market,' and this low state may persist for a long time.
Statistics show that from March 2024 to now, the first positive situation has occurred more frequently, with the market performance on May 6 and June 22 being strong evidence, showcasing the optimistic attitude of short-term players towards the market. However, as the cost of acquiring Bitcoin in the short term continues to rise, the STH-MVRV indicator has shown a concerning divergence phenomenon – Bitcoin prices continue to climb while the STH-MVRV value gradually decreases. The continuation of this divergence trend causes the STH-MVRV value to keep declining, which is very likely to trigger the emergence of a second pessimistic situation.
However, market trends are not irreversible. If during the price rebound phase, STH-MVRV can refresh its previous high, it can break the current risk situation. For example, when Bitcoin rebounded to $110,000 on June 9, the STH-MVRV reached a peak of 1.13, and if this value can surpass this level again and break the divergence, it means that the overall market trend will change, and Bitcoin prices will reach new heights. Looking back at 2024, on July 29 and October 28, Bitcoin rebounded to $69,000 twice, and the STH-MVRV peak rose from 1.06 to 1.08. After successfully breaking through the divergence, a magnificent upward trend was immediately launched.