Bitcoin Bear Market Signal: Approaching the End of the Downturn?

An important on-chain signal flashes for Bitcoin: the cost basis of short-term holders falls below that of long-term holders. Analyst Darkfost of CryptoQuant states that historically this announces the end of a bear market. The Bitcoin price currently stands at $63.900, a rise of 1.6% in the past 24 hours.

Bitcoin is available at OKX and Bybit.

What does the cost basis signal say?

CryptoQuant analyst Darkfost publishes a chart comparing the cost basis of short-term holders (STH, held for less than 6 months) and long-term holders (LTH, held for more than 6 months). When the STH cost basis crosses below the LTH cost basis, historically this indicates that the bear market is entering its final phase. That moment is now occurring, after a three-day confirmation window.

The STH cost basis has fallen sharply in recent months, from $112.500 to $69.000. This means that short-term investors are buying in at increasingly cheaper average prices, a characteristic pattern in the final phase of a downturn. Darkfost notes that supply held for more than 7 years is excluded from the LTH calculation, so that the signal better reflects the economically active group.

End of bear market does not directly mean a bottom

Darkfost is clear about what the signal does and does not imply. The fact that the end of the bear market is approaching does not mean that the bottom is immediately reached at the moment the signal triggers. However, he indicates that entering via a dollar cost averaging (DCA) strategy may now be worthwhile. The opposite signal, where the STH cost basis crosses above the LTH cost basis, then marks the beginning of a true bull market and can serve as an endpoint for that DCA strategy.

Notably, the arrival of institutional players seems to have barely changed the behaviour pattern of Bitcoin investors. The current cycle largely follows the same pattern as previous cycles. Short-term investors buy the dips and thus gradually lower their average purchase price. Earlier, NYDIG warned of a possible further decline towards $38.000, but this new signal actually points to a turning point in the cycle. Miners are also currently facing financial pressure, which also fits with a late stage of a bear market.