BTC Risk Model: An article clearly explains long-term and short-term trading considerations

By Murphy

When BTC’s price is suppressed by the STH-RP, it means that when price hits the short-term holder cost basis moving average line, heavy sell pressure is generated immediately, which is why it cannot break through. This is often the start of a larger-scale bearish downtrend (as indicated by the orange arrows in the figure).

Therefore, we treat the STH-RP model as an important risk signal!

However, once the downtrend begins, the BTC price may deviate significantly from the STH-RP. After that, even if there is a rebound, it will be far away. Therefore, we need to adjust the algorithm to produce a value that is more reference-worthy—for example, the green line in the chart.

（Figure 1）Risk signal: Short-term holder cost basis model

So we can see a visualization of potential decay: 1 red line hits resistance → 2 green line hits resistance → 3 breaks the green line → 4 red line hits resistance → 5 breaks the red line, meaning the bear market is over.

Of course, after 3 there might not be 4 and it could go directly to 5. This is usually caused by some small-probability event that greatly boosts market confidence, thereby instantly reversing the trend.

Obviously, what we are currently seeing is: BTC is in the second stage described above; that is, it is hitting resistance at the green line, while both the red line and green line are still moving downward. That means that as long as BTC does not break the green line next, the “rebound height” will keep getting lower, and the probability of moving downward is higher.

As of yesterday, the green line position is — $72,000.

Let’s look at it from another angle: in terms of technical indicators, the stretch BTC took in March has many similarities to the one in January.

（Figure 2）BTC/USDT daily candlestick chart

It’s also being suppressed by a descending trendline, and it also has two instances of daily-level false breakouts (a lure for buyers). After the false breakout, the trendline indicator is pulled up, so we need to remove this interference and continue using the earlier trendline position.

For example, between January 21 and 28, BTC repeatedly failed to break above $90,586 (red trendline), and ultimately chose to keep dipping. And this time, between March 20 and 26, it again failed to effectively hold above $70,996, then moved downward to $65,548.

Based on the current pattern, the probability of continuing downward is far greater than the probability of moving upward. This conclusion is completely consistent with the result we got from our STH-RP risk model analysis.

Finally, it comes back to the trading layer: if you think you can’t make sense of it or you’re not confident, don’t mess around—otherwise you’ll end up doing more harm the more you try to push it!

For short-term trading, my personal thought is: if the rebound approaches $70,996, I will open a short position to validate my judgment. Avoid high leverage, and at the same time leave room for a possible “false breakout.” A break above $72,000 would be my stop-loss.

For traders who want to build long-term positions, you can consider entering in batches after stage 3 of the STH-RP risk model, continuing until stage 5 is fully built. This method can ensure you buy within the relatively bottom range of the entire bear market; you won’t miss the move, your costs are controllable, and the approach has high certainty.