Bitcoin: As “weak hands” begin to capitulate, what should you expect

• Bitcoin’s price might fall below its Short-Term Holders Realized Price.
• This usually indicates a price bottom and is often followed by a breakout in either direction.

As Bitcoin [BTC] continues to trade within a narrow price range, the leading coin’s price is poised to slip below its Short-Term Holders Realized Price (STH RP), data from CryptoQuant revealed. 

Source: CryptoQuant

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BTC’s STH RP metric tracks the average price at which the coin has been acquired by investors who have held their assets for no more than 155 days (short-term holders). It is used to assess the profitability of the investments of this cohort of coin holders. 

As pseudonymous CryptoQuant analyst Onchained noted, the “significance of this indicator manifests in its ability to act as a potential support level,” as it can be used to identify potential market bottoms.

Historically, when BTC’s price falls below the STH RP, it indicates that short-term holders have begun to sell their holdings at a loss. Analysts interpret this as a sign of capitulation or a loss of confidence in the market, and is often followed by a “substantial correction.”

With BTC approaching this support line in the current market, the CryptoQuant analyst noted:

“This observation is not insignificant, as this price constitutes the cost base of short-term investors. These investors, who hold a substantial share of the bitcoins in circulation, are generally characterized by their skepticism and heightened reactivity to price volatility.”

Breakout in what direction?

With BTC’s price approaching the STH PR, a bottom might be on the horizon. With significant resistance faced by the leading coin at the $30,000 price level, capitulation of “weak hands” might draw in new demand. This can help drive up the coin’s value.

An assessment of BTC’s price movements on a daily chart revealed that accumulation has not slowed down. Key momentum indicators showed that holders have continued to buy BTC. At press time, the coin’s Money Flow Index (MFI) inched closer to the overbought territory at 75.74.

Read Bitcoin’s [BTC] Price Prediction 2023-24

Likewise, the Chaikin Money Flow (CMF) rested above the neutral line at 0.12. A positive CMF value is a sign of strength in the market. It means that the necessary liquidity to drive up the coin’s price is being supplied. 

However, the coin’s Relative Strength Index (RSI) stalled at 49.06. Lingering below the center line meant that while there was a growing amount of buying pressure in the market, BTC’s price refused to react due to poor market sentiment.

Source: BTC/USDT on TradingView

For an upward price correction, sentiment has to improve. According to Santiment, BTC’s weighted sentiment has been mostly negative since May.

Source: Santiment