Bitcoin (BTC) narrowly avoided a major drop last week, thanks to a key on-chain metric called the Short to Long-Term Realized Value (SLRV) Ratio. The SLRV Ratio “flipped” for the first time since November 2022, indicating potential market weakness.
According to James Straten, a research and data analyst at CryptoSlate, the SLRV Ratio served as a warning before the FTX crash and is now hinting at a potential drop towards $23,000 for BTC. However, the impact of Bitcoin’s August comedown could have been far worse.
The SLRV Ratio measures the velocity of Bitcoin transactions by utilizing the HODL Waves metric developed by David Puell and ARK Invest. HODL Waves categorizes the circulating supply of BTC based on the age of the coins used in transactions. The SLRV Ratio specifically looks at the movement of coins within the past 24 hours compared to those that moved between six and 12 months ago.
This metric also incorporates two moving averages, the 30-day and 150-day trendlines. Historical data has shown that crossovers between these trendlines often coincide with significant price events for BTC.
Interestingly, just before the FTX crash, the 150-day trendline crossed below the 30-day trendline, signaling a potential price decline. This same phenomenon occurred in mid-August, three days before BTC dropped to $25,000. Straten pointed out that the last time the SLRV Ratio inverted was just before the FTX collapse.
The behavior of different Bitcoin investor cohorts has also been closely monitored in previous analyses. Short-term holders (STHs), or speculators, have become of particular interest to analytics platforms like Glassnode and CryptoQuant.
The short-term holder cost basis, which reflects the aggregate price at which STHs acquired their BTC, used to act as a market support level. However, recent data reveals that the STH cost basis now sits higher than the spot price, indicating a shift in sentiment. Straten noted that speculators have been selling en masse at a loss since late August.
Looking at the realized price of Bitcoin transactions by age band, data from CryptoQuant shows the price at which coins last moved in transactions. The chart indicates that older coins are still being transacted at higher prices, suggesting reduced selling pressure from long-term holders.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.
In conclusion, the on-chain metric SLRV Ratio serves as an important indicator for Bitcoin price movements. The recent flip of the SLRV Ratio suggests potential weakness in the market, which could result in a drop towards $23,000 for BTC. Additionally, the behavior of short-term holders and the cost basis of their BTC holdings indicate a shift in sentiment and increased selling pressure. However, it is crucial for readers to conduct their own research and exercise caution when making investment decisions.