Cost Basis, Long-Term Holders, And The Cyclical Bottom

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In this month The Monthly Bitcoin, ARK Invest focused on Ethereum and the Merger. As a side dish, they’ve released some valuable and review-worthy stats that we’ll cover. No matter the market, the Bitcoin network continues to produce block after block regardless. The statistics that all this activity produces, however, can be critical to understanding the market.

This is where ARK Invest’s The Bitcoin Monthly comes in. The publication defines itself as an “earnings report” that details on-chain activity and demonstrates the openness, transparency and accessibility of blockchain data. So, the data we are about to cover is the reason for The Bitcoin Monthly.

The Monthly Bitcoin: 200-Week Moving Average And Investment Cost Basis

  • “After closing above its 200-week moving average in July, the price of bitcoin 1 reversed and slipped below it in August. Currently at $22,680, the 200-week moving average now appears to be resistance.”

The center could not hold. The price recovery was short-lived. Markets are red across the board and bitcoin is no exception. At the time of writing, bitcoin is trading at $19,874. For those keeping score, that’s just under last cycle’s all-time high of $20K. Something that shouldn’t happen, but some degree of error is always understandable.

  • “Bitcoin is currently trading above investment cost base at $19,360, its strongest on-chain support level (…) Importantly, throughout bitcoin’s history, trading at investment price usually marks a bottoming process.”

Times are tough, but bitcoin is still trading above investment cost basis. The Bitcoin Monthly explains, “The investor price is calculated by subtracting the cost base of miners from the overall cost base of the market.” As we see it, The Bitcoin Monthly is calling the bottom. They didn’t say it in those exact words, but they certainly hinted at it.

Is the bottom really in, though?

BTCUSD price chart for 09/17/2022 - TradingView

BTC price chart for 09/17/2022 on Gemini | Source: BTC/USD on TradingView.com

The Monthly Bitcoin: Short Term Holder Vs. Long Term Holder

  • “The cost base of a short-term holder (STH) is approaching its cost base of a long-term holder (LTH) – an event that has marked cyclical bottoms in the past. (…) Since the end of July, the difference between the cost base of short and long-term holders has shrunk from $5,840 to $2,500”

Bitcoin Monthly sees it as a sign that “the market usually capitulates and switches back to long-term participation.” Bitcoin’s consolidation process may end soon. However, we could stay for a while in the lower area. That happened before. The point is, all the indicators that The Bitcoin Monthly has highlighted this month point in the same direction. To the bottom.

  • “The supply held by long-term bitcoin holders is 34,500 coins away from reaching 13.55 million – its all-time high. Long-term supply makes up 70.6% of total outstanding supply.

This is the most optimistic of all the outstanding statistics. To clarify, currencies that haven’t moved in 155 days or more qualify as a “long-term supply.” The tourists and the people with high hopes left long ago. And the lion’s share of the bitcoin supply is now in the possession of the true believers. A remarkable situation that is not mentioned enough.

About The Ethereum Merge

  • “In August, ether outperformed bitcoin by 7.6% (…) Historically, ether outperformed bitcoin during ‘risk-on’ bull markets and underperformed during ‘risk-off’ bear markets.”

The effects of the merger affected the market throughout the entire story. Although we are in a “risk-off bear market”, ETH has taken over and led the market for a while there. They accomplished the mythical feat and… the market turned against them. After what seemed like a mission accomplished, the price of ETH began to bleed.

Hidden behind a secret door, that’s what The Bitcoin Monthly contained.

Featured Image by Maxim Hopman on Unsplash  | Charts by TradingView

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