Definition ∞ Short term holder cost basis represents the average price at which investors who have held an asset for a brief period acquired their holdings. This metric calculates the average acquisition price for digital assets held by entities classified as short-term holders, typically those holding for less than 155 days. It provides a crucial reference point for understanding the profitability or unprofitability of recent market participants. When the current market price falls below this cost basis, it indicates that a significant portion of short-term holders are in an unrealized loss position. This can influence their selling behavior and market volatility.
Context ∞ Crypto analysts often use short term holder cost basis to identify potential support or resistance levels and predict market turning points. News reports might highlight when the market price approaches or breaches this level, indicating a critical psychological and financial threshold for recent buyers. A drop below this cost basis can trigger increased selling pressure as these holders seek to minimize losses. This metric is a key on-chain indicator for assessing immediate market sentiment.
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