The Realized Price
The realized price is a capitalization model for Bitcoin that calculates each coin’s “real” value in circulation based on its last movement on the blockchain rather than the current spot price. The realized cap accounts for investors’ cost basis (the price at which they bought their coins), signifying the value at which average investors acquired their BTC.
BTC investors are divided into two groups: short-term holders (STHs) and long-term holders (LTHs). STHs hold onto their coins for less than 155 days while LTHs have held them longer than this threshold amount.
Trend Analysis of Realized Price
A chart displaying trends in Bitcoin’s realized price over recent years shows that it currently sits around $20,100. During bear markets, this level acts as resistance but supports prices during bullish periods throughout cycles. It holds psychological significance since it represents an important transition mark between bear market lows and bull runs.
In full-blown bull rallies, however, Bitcoin investors see this level as a preferable point to accumulate more instead of selling because they believe it will continue rising further up before reaching its peak potential.
Similarly, both STHs’ and LTHs’ cost bases have acted as support or resistance levels depending upon market conditions such as uptrends or downtrends respectively.
The various interactions of STH’s realized price were most prominently visible during the 2021 bull run when there was an increase in demand due to fresh buyers joining them.
This led to an increase in realization costs among these new entrants who had purchased bitcoins at higher rates compared with those who had bought earlier.
Currently, the STH realized price is around $25,300 and close to the spot price. If BTC observes an extended downtrend soon, it will be interesting to see how this line interacts with the spot price.
At present, Bitcoin trades at approximately $28,200 which represents a 1% decline over the last week.
BTC has surged today | Source: BTCUSD on TradingView
The featured image in this article comes from iStock.com while charts are sourced from Glassnode and TradingView respectively.
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