Bitcoin Analyst Reveals Best On-Chain Metric For ‘Day-To-Day Trading’

An analyst has explained how this Bitcoin on-chain indicator has been one of the best in terms of short-term trading during the past month.

In a new post on X, CryptoQuant Community Manager Maartunn has discussed about an indicator that’s suited for doing day-to-day BTC trading. The metric in question is the Realized Price of the short-term holders.

The “Realized Price” here refers to an indicator that, in short, keeps track of the cost basis of the average investor or address on the Bitcoin network. When the spot price of the coin is greater than this metric, the holders as a whole are in a state of net profit. On the other hand, it being under the indicator suggests the dominance of loss in the market.

In the context of the current topic, the Realized Price of only a particular segment of the sector is of interest: the short-term holders (STHs). The STHs are made up of the investors who purchased their coins within the past 155 days.

This cohort corresponds to one of the two main divisions of the Bitcoin market done on the basis of holding time, with the other group being known as the long-term holders (LTHs).

Now, here is the chart shared by the analyst that shows the trend in the Bitcoin STH Realized Price over the past month:

In the above graph, Maartunn has highlighted all the instances where the Bitcoin price made a retest of the STH Realized Price during this window. It would appear that the line has acted as both support and resistance for the asset.

The cryptocurrency finding a break above the line has turned it into support, while it falling under has led to the level changing into resistance. This is actually a pattern that the STH Realized Price has displayed throughout history, not just the past month.

As for why the indicator shows such interactions with the coin’s price, the answer may lie in investor psychology. The STHs tend to include the most fickle-minded investors in the market and they are particularly sensitive to retests of their cost basis.

When Bitcoin retests their Realized Price from above, they may decide to buy more of the asset, as they could believe that the same level would prove to be profitable again in the future. This accumulation provides support to the BTC price.

Similarly, the STHs can sell as a reaction to a retest from below, as they may fear that they would go into losses once more in the near term, so exiting at the break-even would at least give them their money back.

While the Bitcoin STH Realized Price does tend to carry some reliability, it can also show some deviations. As the analyst has marked in the chart, one such outlier instance occurred just earlier in the month.

At the time of writing, Bitcoin is floating around $65,700, up more than 5% over the last seven days.