Written by: Murphy

In the past few cycles, observing the relationship between cost basis and price behavior is one of the best perspectives to see BTC emerge from a bottom structure.

The logic here is that when the price enters the cost range of a certain group of BTC holders, the behavior behind the price trend represents the performance of that group. Is it "better to run first" or "continue to hold"?

If it is the former, the price will encounter resistance near the cost line; if it is the latter, the price will smoothly break through the cost resistance. If the price moves up and down around the cost line, it means the market is entangled and playing games repeatedly.

Figure 1: Average Cost Line of BTC Held for 1-3 Months

Based on long-term data research experience, I believe that among many groups, the cost basis of short-term holders holding for 1-3 months (1-3m_RP) is the most effective reference (as shown by the yellow line in Figure 1).

From the chart, we can see that in all past bear market cycles, 1-3m_RP has been a key resistance level during rebounds in a downtrend. This is because the chips held for 1-3 months are not very firm. A large portion of them did not intend to hold long when they entered.

They may have only wanted to "grab a quick meal" but ended up being trapped, and reluctantly held it for 1-3 months. When the price rebounds and gives them an opportunity to exit, they sell without hesitation.

Therefore, we see that in 2015, 2018, and 2022, every time BTC rallied to the yellow line, it encountered resistance and continued to pull back; then it rebounded again, encountered resistance again, and pulled back...

Of course, this also includes multiple false breakouts, indicating that when some chips began to profit, they "ran first," leading more chips to "follow the example," thus forming a false breakout.

Ultimately, it reflects the investors' lack of confidence in the market.

Figure 2: Supply of BTC Held for 1-3 Months

For example, we look at the changes in the supply of BTC held for 1-3 months in Figure 2, which shows a significant downward trend after March 29. This indicates that this portion of chips has decreased.

There are two possibilities for the decrease: 1. They continued to hold and were reclassified into a longer holding group. 2. They sold and were reclassified into a shorter holding group.

Figure 3: Supply of BTC Held for 3-6 Months

Next, looking at Figure 3, the supply of BTC held for 3-6 months did not show a significant increase after March 29. This proves Situation 2, where BTC held for 1-3 months was sold during the rebound, leaving currently 1.09 million coins.

Having explained the logic, let’s return to the current situation:

As of April 15, 1-3m_RP is roughly around $75,400, and the price of BTC is just near this level. This is the second time BTC is approaching this resistance level in this downward trend.

The last time was between January 13 and January 19; after a slight breakout, selling pressure was triggered, leading to further pullback. Will this time be the same?

From past data, I believe the possibility is high; after all, in the past three cycles, there has never been a second challenge that successfully reversed the trend.

Of course, from a rational perspective, we cannot make "path assumptions." Objectively, there is also a possibility that:

That is, BTC can break through the yellow line, but afterwards it will encounter a larger resistance level above, namely the STH-RP (short-term holder average cost line), currently around $81,000, with 2.31 million BTC (far greater than the 1-3m chips).

If it encounters resistance here, then BTC may experience a period of moving up and down around the yellow line, meaning the market needs time to digest the selling pressure and begins to cautiously choose a direction.

As time goes on, the yellow line will gradually start to turn, similar to the position marked by the green dashed line in Figure 1. This would indicate that the market has emerged from the bottom structure and entered a "bear to bull transition period."

From a probabilistic standpoint, Situation 1 (second encounter with yellow line resistance) is more likely, but Situation 2 (moving around the yellow line) is not entirely impossible. So we need to patiently observe, even if there is a temporary breakout, we still need to judge its authenticity.

Regardless, the current direction of the yellow line is still downward, and it cannot abruptly turn upward. This requires a relatively long transformation process, and this process is the best time for us to make decisions.

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