Bitcoin Retests Realized Price, Will Rally Be Saved?
On-chain data shows that Bitcoin price is now retesting its realized price. Can this help boost asset value and restart the rally?
Bitcoin is now retesting its realized price of around $19,700
As an analyst pointed out in a CryptoQuant post, BTC must hold this level if the bullish outlook continues. The “realized price” here refers to a price derived from a Bitcoin capitalization model called the “realized cap”.
Unlike the normal market cap, which puts the value of all coins in the circulating supply at the same most recent BTC price, the realized cap says that the “true” value of each coin is the price at which it was moved by the last time.
The main advantage of this cap model is that it puts less weight on coins that have been dormant for a long time (since the price would be much lower back then).
Many of these coins have become permanently inaccessible due to lost wallet seed phrases. However, the market cap still assigns them the same value as any other currency, despite the fact that they can no longer significantly influence the price. The realized limit helps to mitigate this problem.
If the realized limit is divided by the total number of coins in circulation, the “realized price” is obtained. Unlike the regular price (which can similarly be obtained from the market value), this realized price is not a value that applies to each coin.
What realized price means is the cost basis of the average holder in the Bitcoin market. This is the price at which the average investor bought/purchased their coins.
Here is a graph that shows the Bitcoin realized price trend over the last few months:
Looks like the price has been approaching the metric in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin price was below the realized price during the bear market lows, but with the start of the last rally in January, the asset managed to break through the level.
Whenever the price is below the realized price, the average investor is at a loss. These holder conditions have been seen historically during bear markets, and the level has acted as resistance. In contrast, such periods lasted, which implies that the price remained stuck with it.
Bullish winds usually take over as price breaks above this level, and whenever a successful break occurs, this line turns into support.
With the latest decline in Bitcoin, the price is now again testing the realized price, currently valued at around $19,700. This can be a real test for the rally, as if a real transition to a period bull has taken place, this level should act as a support and help the price recover.
A failure here, however, could be bad news for the cryptocurrency, as it could be a sign that the bear market is not over yet.
BTC price
At the time of writing, Bitcoin is trading around $19,900, down 11% over the past week.
BTC has plunged in the past day | Source: BTCUSD on TradingView
Featured Image of André François McKenzie at Unsplash.com, Charts by TradingView.com, CryptoQuant.com