Author: Murphy

Over the past few cycles, observing the changing relationship between cost base and price behavior has been one of the best perspectives for observing BTC emerging from a bottoming structure.

The logic is that when the price enters the cost range of a certain group of BTC holders, the price movement reflects the behavior of that group. Is it a matter of "selling now" or "holding on"?

If it's the former, the price will encounter resistance near the cost line; if it's the latter, the price can smoothly break through the cost resistance. If the price fluctuates around the cost line, it means the market is repeatedly struggling and playing a game.

 Figure 1: Average cost line for BTC held for 1-3 months

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

As the chart shows, in all past bear market cycles, the 1-3m_RP level has been a key resistance level for rebounds during downtrends. This is because those holding positions for 1-3 months are not very committed; a large portion of them did not intend to hold for the long term when they entered the market.

They might have originally just wanted a quick bite, but ended up getting trapped and forced to hold for 1-3 months. When the price rebounds and offers an opportunity to break even, they will sell without hesitation.

Therefore, we saw that in 2015, 2018, and 2022, every time BTC rebounded to the yellow line and encountered resistance, it would continue to pull back; then it would rebound again, encounter resistance again, and pull back again...

Of course, there are also many false breakouts, which means that when some chips start to make a profit, they "run first," and then more chips "follow suit," thus forming a false breakout.

Ultimately, this reflects a lack of confidence among investors in the market.

 Figure 2: Supply of BTC held for 1-3 months

For example, looking at Figure 2, we see a clear downward trend in the supply of BTC held for 1-3 months after March 29th. This indicates that the supply of these BTC has decreased.

There are two possibilities for it to decrease:

• 1. Because of continued holding, it has been categorized into the group of holders with a longer holding period.
• 2. Because it was sold, it was reclassified into a shorter holding group.

 Figure 3: Supply of BTC held for 3-6 months

Looking at Figure 3, the BTC supply held for 3-6 months did not increase significantly after March 29th. This confirms scenario 2: BTC held for 1-3 months was sold during the rebound, and there are currently 1.09 million coins remaining.

🚩 Now that we've covered the logic, let's return to the present:

As of April 15th, the 1-3m_RP was roughly around $75,400 , which is also near the price of BTC. This is the second time BTC has rebounded and approached this resistance level during this downtrend.

The last time this happened was between January 13th and January 19th; a slight breakout triggered selling pressure, leading to a continued pullback. Will the same thing happen this time?

Based on past data, I think it's highly likely; after all, there has never been a case of a successful reversal on the second attempt in the past three cycles.

Of course, from a rational perspective, we cannot make "pre-defined paths." Objectively speaking, another possibility exists:

This means that BTC can break through the yellow line, but it will encounter a larger resistance level above, namely STH-RP (Short-Term Holders Average Cost Line), which is currently around $81,000 and has 2.31 million BTC (far greater than the 1-3m chips).

If it encounters resistance here, BTC may fluctuate around the yellow line, meaning the market needs time to digest selling pressure and carefully choose a direction.

As time goes on, the yellow line will gradually begin to turn upwards, similar to the position marked by the green dotted line in Figure 1. This means that the market has completed its bottoming process and entered a "bear-to-bull transition period".

Statistically speaking, scenario 1 (meeting resistance at the yellow line for the second time) is more likely, but scenario 2 (oscillating around the yellow line) is not entirely impossible. Therefore, we need to observe patiently and determine whether even a temporary breakout is genuine or not.

Regardless, the yellow line is currently trending downwards and is unlikely to suddenly turn upwards. This will require a relatively long transition period, and this period provides us with the best time to make a decision.