Bitcoin is at a critical juncture, with key on-chain indicators that could determine its future direction. This analysis is also relevant for novice investors.
Cost models for bitcoin
The graph shows several important cost models and their relationship to the current bitcoin price. These models include the 128-day and 200-day moving averages (DMA), the true average price, the realized price, the coin-time price, and the short-term and long-term cost prices.
A cost represents the value of a bitcoin the last time it was sold. For example, an investor bought a bitcoin for $68,000 in early June. Then the cost price for this bitcoin is $68,000 since the investor bought it at that price.
Functions of cost models
• 128DMA and 200DMA: The 128DMA (orange dotted line) and 200DMA (purple dotted line) are important technical indicators that are often used to determine the overall trend. Currently, the bitcoin price is moving around these levels, indicating that we are at a decisive point. A break above these averages could indicate a new uptrend.
• Actual average price: The blue line represents the actual average price of all bitcoin. This price is currently below the current market price, indicating that most investors are in profit. This can reduce potential selling pressure and support the price unless investors come in for big gains.
• Realized price and cointime price: The realized price (red line) and the cointime price (orange line) are both important on-chain indicators that represent the average price at which all bitcoins in circulation last traded. Bitcoin’s current price is above these levels, which is generally a positive sign for the market.
• Cost prices for short-term and long-term holders: The cost prices for short-term holders (pink line) and long-term holders (green line) provide insight into the cost basis of different groups of investors. The bitcoin price is currently above these lines, suggesting that both short-term and long-term investors are profitable. An investor becomes a long-term investor after holding his bitcoin for more than 155 days.
Impact on the crypto market
Bitcoin is currently trading at around $61,500, which is below two key price points in the bull market; the short-term cost basis ($63,400) and the 128-day moving average ($64,500).
As we discussed in our previous article, this reflects a crucial decision point during a bull market:
• If the bulls want to buy the dip, we are now within their value range.
• If the bears are in control, this is the time when they can take the initiative.
The 200 DMA is at $57,600, which we expect will act as a safety net if necessary. The 200 DMA also corresponds to the lowest prices of the May dip.