Bitcoin seems on the verge of a massive breakout as it nears a crucial bull market trendline that broke in June last year.

From a technical perspective, this development is an important step for Bitcoin to re-enter a price point that has traditionally opened the door to massive gains.

Indicator of Market Recovery

According to on-chain analytics firm CryptoQuant, the latest swing in Bitcoin price is attempting again to retest Short-Term Holder (STH) Realized Price — which serves as one of the most critical sentiment indicators for understanding market directions.

J. A. Maartunn, a contributor at CryptoQuant revealed that when considering the price discovery dynamic of Bitcoin, this STH realized price is truly important. For short-term holders (holding Bitcoin for less than 155 days), this is the average cost basis of all Bitcoin owned.

In the past, the STH realized price has served as a reliable support level to aid the prediction of possible bounce price levels during a bull market. Currently, the Bitcoin market is going through yet another substantial test of this trendline, with recent movements hinting at a reattainment of this crucial level.

Maartunn discloses that the current market behavior where Bitcoin has successfully reclaimed the STH realized price is a “positive sign,” indicating a possible accumulation phase among short-term holders.

The analyst also mentions that this situation typically gives birth to more buying as investors aim to average down or increase their positions at the same price they entered initially.

Particularly, since early 2023, Bitcoin has reclaimed the STH realized price twice, each time followed by at least 30% gains, according to Maartuun.

This suggests that as the asset has now reclaimed the STH realized price again, a substantial rally to the upside might just be on the horizon.

Bitcoin Challenges and Opportunities Ahead

However, it’s not all smooth sailing. Recent data from another prominent on-chain analytics firm, Glassnode, suggests several roadblocks short-term holders face.

Over the past month, 66% or more of Bitcoin (BTC) holdings have now gone underwater for this group at current price levels, according to the latest report by Glassnode.

That represents one of the largest deteriorations of short-term holder profitability in history, which means a lot of buyers at the top have lost a significant amount.

Adding to this sentiment, Santiment has recently reported that “Bitcoin’s amount of holders (any wallets with >0 coins) have been dropping aggressively.” According to Santiment, “traders still seem to believe the March ATH was as good as it’s going to get in 2024.”

Although it’s not all grim, the market intelligence platform also revealed, “When we see mass liquidations like this, the probability of a continued rebound only increases.”

Bitcoin’s amount of holders (any wallets with >0 coins) have been dropping aggressively as traders still seem to believe the March ATH was as good as it’s going to get in 2024. When we see mass liquidations like this, the probability of a continued rebound only increases. pic.twitter.com/YTHEFTtfhY

— Santiment (@santimentfeed) July 17, 2024

Featured image created with DALL-E, Chart from TradingView