• The article discusses the “realized price” of Bitcoin, which is a capitalization model that takes into account the cost basis of the average investor in the Bitcoin market.
• This metric can be used to assess whether average investors are currently in a state of gain or loss, and it has recently been approaching its peak level again.
• If BTC can maintain this level, then it could form a strong support level for the asset’s rally.
What Is The Realized Price Of Bitcoin?
The realized price of Bitcoin is derived from a capitalization model called the “realized cap.” Unlike the normal market cap, which puts the value of all coins in circulation as equal to the latest BTC price, this model says each coin’s “true” value is the price at which it was last moved. By dividing this realized cap by total number of coins in circulation, one can obtain the “realized price,” which signifies the cost basis of an average investor in the Bitcoin market.
How Can The Realized Price Help Assess Market Conditions?
The realized price helps mitigate issues such as when coins become permanently inaccessible due to lost wallet seed phrases but still have their value attributed by traditional market cap measures. It also allows analysts to assess whether average investors are currently in a state of gain or loss — if BTC is trading under its realized price then holders are generally considered to be at a loss on their investments.
What Has Been The Trend In The Realized Price Over Time?
In recent months, there has been an apparent trend that shows BTC breaking through its realized price with start of its latest rally in January 2021 (see graph below). Whenever prices are below this level, holders tend to be at a net-loss on their investments:
Looks like the price has been approaching this metric | Source: CryptoQuant
Can This Push Up Asset Value And Restart Rally?
If BTC can maintain current levels near its realized peak then it could form a strong support level for future rallies and restart current uptrends. As noted by an analyst from CryptoQuant, maintaining this level would be necessary for any bullish outlooks for bitcoin moving forward.
In conclusion, tracking metrics such as bitcoin’s realized price can help gauge overall sentiment and whether investors are generally making profits or losses on their investments — if prices remain close to this peak then there could be potential for continued growth in bitcoin’s value over time.