Bitcoin is under heavy pressure and as a result, the price has lost more than 5.5% of its value over the past seven trading days. On June 25, Bitcoin reached its lowest level in 6 weeks at $58,400.

Important support broken

During the correction in recent days, Bitcoin also fell below the cost basis of short-term investors.

“Since mid-June, Bitcoin’s spot price has fallen below the cost basis of people holding their BTC 1w – 1m ($68,500) and 1m – 3m ($66,400),” Glassnode wrote in its weekly newsletter on June 25.

“Historically, this structure results in a deterioration in investor confidence, increasing the risk of a deeper correction and prolonging the recovery,” Glassnode dangerously concludes.

The cost basis of investors indicates the average price at which they purchased. You often see that the STH cost basis in particular plays an important role for the Bitcoin price.

STH stands for short-term holder and refers to people who have held their Bitcoin for less than 155 days. The cost basis is the average purchase price they paid for their Bitcoin.

The limitations of on-chain analysis

However, don’t forget that on-chain analysis also has its limitations. It’s nice to make statements about Bitcoin this way, but many people hold their digital coins on centralized exchange platforms.

With on-chain analysis you only capture the activity on the blockchain. We do not see everything that happens on the stock exchanges on the blockchain, which makes it difficult to make definitive statements.

If a small amount of Bitcoin is sent from Binance to a personal wallet, we still don’t know how long the person in question had that BTC on Binance.

It could be that they were just bought, but they could also have been in his or her possession for years. Maybe the person in question decided after years to opt for a personal wallet.

So definitely do not see on-chain analysis as a form of science.

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