Most Bitcoin (BTC) holders are in a favorable position due to a cost basis largely below the cryptocurrency’s current price range. Bitcoin’s ongoing sideways movement has not triggered significant concerns of capitulation among ecosystem participants, as many hold relatively lower cost levels.
Diverse cost basis among ecosystem participants
The cost basis for Bitcoin holders varies significantly, with different groups of participants having distinct entry points. Historically, Bitcoin has rarely traded below its cost basis, allowing most buyers to remain profitable. The current market cycle has not seen a deep drawdown, and most holders have not been forced to sell at a loss.
Whales, particularly those who accumulated during previous bear market cycles, hold Bitcoin at an average cost of around $27,000. This is significantly below the broader market average of $31,456. On the other hand, mining companies face a higher cost of $43,000 per BTC due to increased investments in new power sources and advanced mining equipment following the halving of the April block reward. Despite the higher costs for recently mined Bitcoin, many miners still benefit from rewards accumulated in earlier cycles.
Short-term traders and new buyers face higher costs
Short-term traders, particularly those on Binance, have an average cost basis of $55,000, close to Bitcoin’s current trading levels. This group of participants focuses less on long-term holding and instead opts for active trading strategies. New custodial wallet holders, including those who recently bought Bitcoin through ETFs, face the highest cost of $62,000. These investors, often influenced by mainstream market hype, entered the market at its peak and are currently at a loss.
Bitcoin average cost basis over time against market price | Source: Mesmer Data
As Bitcoin’s price remains stable, the overall cost basis for these participants gradually increases, leading to unrealized losses. The risk of heavy unrealized losses and potential sharp price drops continues to be a concern, especially for those who bought at higher levels.
Whales and exchange activity indicate cautious optimism
Despite the current market conditions, there is no immediate threat of capitulation. Exchange reserves show a near-all-time low, reflecting whales’ activity and continued involvement in the market. However, sentiment among traders remains cautious, with fear still present despite some recovery from recent lows.
During the 2024 cycle, retail investors and whales have been quicker to take profits during rallies, aware of Bitcoin’s more predictable price movements. The market has also seen significant whale activity, particularly from Binance’s custodial service, Ceffu, which deposited over 12,320 BTC in August. While some whales have taken profits, leading to large inflows to exchanges, overall balances remain high, suggesting preparation for a potential bull market.
Stablecoin support, a key indicator of liquidity, remains subdued. Tether (USDT) has seen only a modest increase in supply, while Binance’s FDUSD, closely linked to Bitcoin rallies, has remained unchanged. Bitcoin’s current stability, supported by a favorable cost basis for most participants, suggests a cautious but optimistic outlook as the market navigates the 2024 cycle.