Understanding Bitcoin's Long-Term and Short-Term On-chain Cost Basis
Imagine a vibrant city with two distinct groups of residents: long-time inhabitants who have lived there for decades, and newcomers who have just recently moved in. The long-time residents have weathered many challenges and possess a deep understanding of their neighborhood's true value, making them less likely to sell at the first sign of adversity. The newcomers, however, tend to be more reactive to market fluctuations and may relocate quickly if property values decline.
In the Bitcoin ecosystem, these groups correspond to Long-Term Holders (LTH) and Short-Term Holders (STH). Analyzing the average purchase price (cost basis) for these groups provides valuable insights into overall market sentiment, key support and resistance levels, and potential shifts in market cycles.
What is the Long/Short-Term On-chain Cost Basis?
This on-chain metric measures the average acquisition price of bitcoins held by two distinct cohorts:
- Long-Term Holders (LTH): Investors who have held their bitcoins for more than 155 days.
- Short-Term Holders (STH): Investors or traders who have held their bitcoins for 155 days or less.
The metric derives from the realized price, which represents the average price at which coins in each cohort were last transacted on-chain.
By segmenting the realized price between LTH and STH groups, we can assess the average cost basis for each and understand their relative market exposure.
Example:
Assuming the current Bitcoin price is $50,000:
- LTH realized price = $30,000 (average cost basis for long-term holders)
- STH realized price = $48,000 (average cost basis for recent buyers)
If Bitcoin's price falls below $48,000, many short-term holders are at a loss, which may increase selling pressure. Conversely, prices above $48,000 indicate short-term holders remain profitable, supporting bullish momentum.
Why 155 Days?
The 155-day threshold is statistically derived from Bitcoin's holding patterns. Coins held longer than this period are significantly less likely to move, representing "strong hands" or patient investors. Conversely, coins held less than 155 days are more prone to trading or selling, often classified as "weak hands."
What is Realized Price?
Realized Price is the weighted average price at which bitcoins were last moved on-chain. It reflects the average cost basis of specific holder cohorts.
- STH Realized Price (Red): Average acquisition cost for coins held less than 155 days.
- LTH Realized Price (Blue): Average acquisition cost for coins held more than 155 days.
- BTC Realized Price (Orange): Network-wide average cost basis across all holders.
How to Interpret the Chart: "Bitcoin: Long/Short-Term On-chain Cost Basis"
| Line Color | Metric | Definition |
|---|---|---|
| Black | BTC Spot Price | The current market price of Bitcoin |
| Red | STH Realized Price | Average cost basis for short-term holders (<155 days) |
| Blue | LTH Realized Price | Average cost basis for long-term holders (>155 days) |
| Orange | Aggregate Realized Price | Network-wide average cost basis |
| Purple Area | Capitulation Zone | BTC price below all realized prices; indicates undervaluation |
Key Insights from the Chart
- When the BTC Spot Price is above both LTH and STH realized prices, the majority of holders are profitable—typically a bullish market condition.
- When the BTC Spot Price falls below both LTH and STH realized prices, most holders face unrealized losses, signaling bear market capitulation.
- The purple zones (such as late 2022) mark extreme undervaluation periods, historically linked to capitulation and accumulation phases.
- As of May 2025:
- Bitcoin price remains above all major cost basis levels, indicating bullish momentum.
- STH realized price is rising rapidly, showing strong retail buying interest.
- LTH realized price is increasing steadily, reflecting ongoing accumulation by long-term investors.
- Absence of a purple capitulation zone suggests low risk of immediate market bottom formation.
Why This Matters to Traders and Investors
- Market Regime Shifts:
- Price below realized costs signals undervaluation and potential fear-driven selling.
- Price above realized costs suggests overvaluation risks or bullish breakouts.
- Crossovers and Sentiment:
- When STH realized price surpasses LTH realized price, it often marks changing market sentiment or transitioning cycles.
- A declining STH cost basis relative to LTH signals capitulation and market bottoms.
- A faster rising STH cost basis indicates increasing demand and possibly late-stage bull market dynamics.
Additional Insights
- Market Sentiment:
Indicates which groups are in profit or loss. For example, Bitcoin's price above STH cost basis supports bullish sentiment among recent buyers, whereas a drop below induces selling pressure. - Support and Resistance Levels:
Cost basis levels often function as psychological barriers. The STH cost basis can serve as resistance during bear markets and support during bull markets, while LTH cost basis typically acts as a strong support level. - Market Cycle Dynamics:
Long-term holders accumulate during downturns and distribute during rallies. A rising LTH cost basis signals strong conviction and accumulation, whereas rising STH costs indicate increased retail participation. - Behavioral Patterns:
Short-term holders are more sensitive to price volatility and prone to selling during downturns, while long-term holders generally exhibit greater patience and resilience.
Summary Table
| Metric | Line Color | Meaning | Market Signal |
|---|---|---|---|
| BTC Price < All Realized Prices | - | Capitulation Zone (purple area) | Potential market bottom/accumulation |
| BTC Price > All Realized Prices | - | Profit Zone | Bullish continuation |
| STH Realized Price Rising Fast | Red | Retail buying intensifies | Risk-on sentiment |
| LTH Realized Price Flattening | Blue | Dormant coins remain unmoved | Long-term conviction (HODLers) |
By analyzing the average acquisition prices of both long- and short-term Bitcoin holders, this on-chain metric provides a nuanced view of market structure, underlying support, and investor psychology—helping market participants understand not only where the capital lies but who holds it and for how long.