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It's relative to the bottom bracket, if you put the blue bike in line with the red bike bottom bracket, you'll see that the toptube of the blue bike will be longer than the red bike.
One thing I wax lyrical about fit is the saddle distance from the bottom bracket as shown in the diagram below, in order for that blue bike in the diagram you use, you need a massive seatback seatpost to have the same fit as the red bike so you'll be comfortable on the bike.
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*What I meant is shorter actually. Shorter toptube. So 'smaller' bicycle. Poor phrasing on my part.
But the point remains. Ed says the steep seattube makes the bike feel longer (56cm toptube instead of 54.5cm), but wouldn't it make it feel shorter? Like you said (but in reverse):
With identical toptube lengths, surely the one with the steep seattube (blue) will feel shorter? Because the seat is positioned closer to the headtube.
Edit (re below): Ah, right. I wasn't
taking into accountunderstanding keeping the saddle at the same position relative to the bottom bracket (which I guess is a perquisite for a good bike fit), like @Turkish said. In that case it makes sense.