Analyzing Short Term Holders
How to use the short-term holder cost basis to spot local tops & bottoms during bull & bear markets in Bitcoin
In this newsletter we’ll show how to use the short-term holder cost basis to its fullest potential. It’s one of the most powerful on-chain metrics that tracks the average purchase price of young coins, moved in the last five months. This metric is one of the best ways to spot bull and bear markets in Bitcoin, as well as identify potential local tops and bottoms.
This chart is now live available at the Bitcoin Strategy Platform
The short-term holder (STH) cost basis is also known as the short-term holder's realized price. It’s a volume weighted average of coins that moved in the last five months, which represents the average purchase price of the short-term holders. The result is the green dotted line on the chart above.
The orange line on the chart is the Bitcoin price over time. As you can see, the price tends to fluctuate around the green line, sometimes deviating significantly from it. These deviations are measured in standard deviations, which is the second chart.
The shaded areas represent the periods in which the STH is either in a profitable position (green) or at a loss (red).
Vertical bars mark the halvings that have occurred so far and the blue dots are the local all-time-highs.
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In the second chart, the standard deviations indicate: