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The bitcoin bear market has recently moved on as the crypto has failed to maintain its upward momentum. How low can the price go before there is a bottom?
Bitcoin Price Models Set Different Cycle Bottom Targets
A recent message from CryptoQuant has talked about the different pricing models for BTC and where they could be a possible bottom.
Before looking at the data from these pricing models, it is best to understand the main Bitcoin capitalization models first.
The normal market cap of the crypto is calculated by taking the sum of the entire circulating supply and multiplying it by the current BTC price.
Another capitalization method is the “realized cap.” Where this model differs from the usual market cap is that instead of taking the last value of BTC, it weighs each coin in circulation at the price at which that particular coin last moved, and then takes a sum for the entire supply. .
Next up is the “average limit”, which simply gives us the average market cap for the entire lifetime of Bitcoin by adding up the market cap for each trading day and dividing it by the total age of the crypto (in days).
Each of these capitalization models can be divided by the total number of coins in the circulating supply to give their own “price” (which in the case of the market cap, of course, will be the normal current price).
Here is a chart showing the trend in these Bitcoin prices derived from these cap models:
Looks like the price has dipped below realized price | Source: CryptoQuant
Historically, the bear market bottoms for Bitcoin have usually formed when the price has traded below the realized price. Currently, the value of the crypto meets this condition.
However, the realized price alone cannot determine the bottom, and this is exactly where the other models come in handy.
As you can see in the chart, there are also two other prices, the “delta price” and the “thermo price”. The first of these is derived by the “delta cap”, which is defined as the difference between the realized cap and the average cap.
In the bears of 2015 and 2018, the bottom was reached when Bitcoin fell towards the delta price. Given that this stat is currently valued at around $14.5k, it means the crypto could potentially fall another 28% before the bottom, if the past trend follows suit this time around as well.
As for the thermo price, this model is similar to realized price, except that instead of weighing the price at which each coin last moved, this method uses the value at which the coins were first mined.
The bottom of 2011 occurred when Bitcoin reached this level. However, CryptoQuant points out in the post that since the gap between the current price ($20k) and the thermo price ($2365) is too wide, it is unlikely to act as the bottom indicator for this cycle.
At the moment of writing, The price of Bitcoin hovers around $20k, down 5% over the past week.
BTC continues to consolidate | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, CryptoQuant.com