Bitcoin’s short-term holder (STH) cost basis may significantly influence near-term market trends. A decisive drop below this level could trigger substantial volatility. Bitcoin’s current STH cost basis is approximately $93,460, making it a critical point for market sentiment. Historically, drops below the STH realized price have often preceded capitulation phases, particularly affecting newer investors with thin margins. In 2022, Bitcoin breached its STH cost basis multiple times, leading to sharp sell-offs and liquidations. For instance, in May, the spot price fell to $30k while STHs were at $34k; in June, it cascaded to $25k against a $32k cost basis. Each deviation below the STH cost basis sparked significant market fear. Open Interest (OI) plays a crucial role in this scenario. Rising OI during bullish signals indicates potential liquidity, but during downturns, it can exacerbate liquidation risks. With Bitcoin’s OI currently at $64.82 billion, the derivatives market might be overheating. If Bitcoin falls below its STH cost basis of $93k, a mass exodus and potential capitulation could occur as OI positions are liquidated en masse.
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