Most Bitcoin holders have a favorable cost basis

Bitcoin (BTC) at its current price range is not threatened by capitulation. The 2024 bull cycle is mostly above the cost basis for several types of ecosystem participants. 

The current Bitcoin (BTC) sideways movement may not worry most ecosystem participants, who hold at a relatively favorable cost basis. Except for buyers at the very top, other BTC holders have a much lower point of capitulation. 

The cost basis of ecosystem participants varies widely, with each specific acquisition diverging from the average cost basis. BTC has traded under its cost basis only as an exception, with most buyers remaining in the money. The recent market cycle is also not showing a deep drawdown, and most holders have not been pushed to capitulate.

Old whales have a below-average cost basis of $27,000 per BTC, acquired during previous bear market cycles. Their entry level is way under $31,456 on average for all buyers. 

Mining companies have a current cost of $43,000 per BTC, after aggressive growth with investments in new power sources and the latest mining rigs. The long-term cost basis for miners is based on pre-halving costs, which rapidly expanded since April’s slashing of the block reward. Miners are in a situation where the latest BTC produced are extremely expensive, but they are also sitting on mining rewards from previous halving cycles. 

Bitcoin average cost basis over time against market price | Source: Mesmer Data

Binance traders have a cost basis of $55,000, close to current BTC levels, and they are the short-term cohort with no plans of long-term holding, but active trading instead. 

The only cohort at a loss are buyers with funds in new custodial wallets. Those include recent ETF buyers, who have an average cost basis of $62,000. Custodial wallets often reflect buying from ETF or other entities facing the world of traditional finance. The high cost basis may be created by mainstream hype, usually coinciding with the highest BTC range. 

At the same time, with the price drifting sideways, the cost basis is gradually increasing, creating unrealized losses. Heavy unrealized losses and sharp price drops of 10% or more remain among the leading risk factors for BTC. 

The market already absorbs selling from short-term cohorts , which immediately cut their holdings during the latest downturn. Holding waves show accumulation or long-term ownership are not so easily affected by price movements. 

The recent cost basis showed some of the holdings were sold during the August hike above $64,000. The current cohort of whales, miners, traders and custodial wallet buyers has a slightly higher cost compared to early August. Miners have the biggest shift in short-term costs, getting closer to the market price. In the past month, newer whales were also more active, while older entities seem to have stopped their accumulation. 

Bitcoin full bull market still delayed

Bitcoin trading remains active, with no signs of capitulation. Exchange reserves reflect the recent activity of whales, and are near an all-time low. Trading activity still shows a sentiment of fear , though up from the recent lows of ‘extreme fear’. 

During the 2024 cycle, both retail and whales are also much faster to take profits during rallies, knowing BTC is now more predictable and may not break out easily to uncharted levels. 

In the past weeks, BTC also felt the effect of whale trades on both the supply and demand side. The biggest sellers included Ceffu, Binance’s custodial service. The service has deposited more than 12,320 BTC since August, when BTC had several smaller relief rallies. Recently, Ceffu received funds back, with up to $4M in USDC in a single transaction. 

Other known whale wallets have remained active, though ending with deep losses after selling near local lows. The exchange whale ratio also points toward active coin movements to exchanges, which is considered a bearish signal. 

The ratio remains high, due to the extremely low exchange compared to the recent inflows from large known wallets. While whales have shown readiness to take profits, overall balances are the highest for the past two years, which is seen as a preparation for a bigger bull market.  

Support from stablecoins remains subdued. Tether (USDT) expanded its supply from 118.09B to 118.39B in the past week. Binance’s native FDUSD, which has shown close connection to BTC rallies, remains unchanged with a supply of 2.5B tokens after last month’s cuts.