Bitcoin cycle analyst Root has revealed an explanatory chart based on a key on-chain indicator, shedding light on the complex stages of Bitcoin’s price within its 4-year cycles. This chart highlights the different phases of the cryptocurrency‘s price over time, providing insights into emerging patterns.
To differentiate between bull and bear periods, Root uses the “short-term holder cost basis” as a critical on-chain metric. Short-term holders (STHs), representing the impulsive side of the BTC market, include investors who have bought and sold within the last six months. The cost basis, or “realized price,” reflects the average price at which this group purchased their coins.
Root’s graph utilizes the Z-score of the STH cost basis to measure how much the indicator deviates from its average value. Bull markets indicated by green values and bear markets shown in red play a significant role in interpreting Bitcoin’s price trajectory.
Interestingly, the graph, named the cheat sheet, demonstrates a consistent pattern throughout Bitcoin’s existence, aligning the peaks of bull markets closely with the troughs of bear markets.
Green dots representing market peaks indicate a euphoric phase where the STH cost basis significantly exceeds the average, reflecting intense buying during high bull run price levels. Conversely, red dots marking market bottoms emerge during an accumulation phase, where STHs sell at substantial losses, paving the way for resilient hands to buy coins at low bear market prices.
Examining the current scenario, Bitcoin finds itself in a “disbelief” phase, where investors hesitate to fully embrace the sustainability of the ongoing rally. The chart, following patterns from previous cycles, suggests that the current cycle’s BTC bull run may not fully commence until 2025, in line with historical trends.
With recent developments, Bitcoin has experienced a roughly 3% increase in the last 24 hours, surpassing the $44,000 mark. This resurgence adds an intriguing layer to the ongoing narrative, highlighting the cryptocurrency’s resilience amid dynamic market forces.