The Long-term Holders Realized Price and Short-term Holders Realized Price are two important metrics used in on-chain analysis, and the cross between them is historically important. It should bring some volatility back to the market.
The last time we saw the cross between two lines was around 2019, which happened prior to Bitcoin's plunge to a multi-year low at $3,100. When the short-term realized price drops below the long-term realized price, the market is considered extremely oversold.
Within $2K of crossing pic.twitter.com/UuTqoxaWK1
— Will Clemente (@WClementeIII) September 1, 2022
Whenever the profitability of the digital gold is too low, inflows into it reverse upwards since investors can increase their potential profit by entering at a lower price. Technically, Bitcoin's drop below the realized price of short- and long-term holders is an important sign that shows the extremely low profitability of the network.
Two scenarios
With the profitability of the market dropping to new lows and realized price reaching values we have not seen for a year, we might see two options for how things can go from here: a spike in the trading volume on the market with institutional investors starting a buying spree or a sudden increase in selling pressure as both short- and long-term investors would like to exit at the breakeven point or a relatively small loss.
Unfortunately, both scenarios are equally possible, considering the lack of inflows to the industry in general, strict monetary policy in the U.S. and a historically problematic September that brought nothing but losses for the market in the past.
As for now, the market awaits the upcoming CPI data and FOMC meeting that should provide some volatility for Bitcoin and cause at least short-term movement on the market.
Alex Dovbnya
Denys Serhiichuk