As Bitcoin continues its strong rally, $22,400 could be the level to watch, if this on-chain metric is anything to go by.
The realized price of Bitcoin’s long-term holder is currently around $22,400
This is according to the latest weekly report of GlasnodeBTC broke through all three market realized prices in April 2019. To understand the concept of “realised price”, it is first necessary to look at the realized limit. The realized cap is a capitalization model for BTC that values each coin in circulation at the price it was last traded at.
This is different from the usual market cap, which places the value of all tokens at the same current price of Bitcoin. When the market cap is divided by the total number of coins in circulation, the BTC price is obtained, a fact that is not at all unexpected since the market cap is calculated by multiplying the price by the number of coins to begin with.
However, if the same idea is applied to the realized limit (i.e. if it is divided by the number of coins), it becomes a sort of “realized price‘ can be derived. The importance of this price is that it is the cost base of the average holder in the Bitcoin market.
The implication of this is that if the (normal) price of BTC falls below this realized price, the average investor can be assumed to have entered a state of loss.
All investors in the market can be divided into two major cohorts: the “short-term holders” (STHs) and the “long-term holders(LTHs). The former includes investors who bought their coins less than 155 days ago, while the latter includes holders who have held their coins longer than that period.
Now, here’s a chart that shows the trend in the realized price for the entire Bitcoin market, as well as for the STHs and LTHs, over the past five years:
Looks like the value of the crypto has broken past all but one of these metrics | Source: Glassnode The Week Onchain - Week 3, 2023
As shown in the chart above, for much of the bear market, BTC price was below all three of these realized prices, suggesting that the average Bitcoin investor across all cohorts suffered an unrealized loss.
However, in its most recent rally, the crypto has so far managed to break above the STH cost base ($18,000) as well as that of the entire market ($19,700). The LTH realized price of around $22,400 has yet to be reached by the coin.
A similar rally took place in April 2019, marking the end of the 2018-2019 bear market. But in that rally, Bitcoin managed to rise above all three realized prices.
If a similar transition really happens in this bear market, then the $22,400 level could be the level to watch out for, as a break above that could signal a return to a bullish regime.
BTC price
At the time of writing, Bitcoin is trading around $21,100, up 22% over the past week.
BTC continues to move sideways | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com