On-chain data shows Bitcoin prices are now making a retest of realized prices, could they help push the value of the asset up and restart the rally?
Bitcoin Is Now Retesting Realization Price Around $19,700
As analysts in the CryptoQuant post pointed out, BTC should maintain this level if the bullish outlook continues. “Realized price” here refers to the price derived from Bitcoin’s capitalization model called “realized cap.”
Unlike the normal market cap, which puts the value of all coins in circulation at the same price as the latest BTC, the cap realizes that each coin is the “correct” value of the price at which it was last moved.
The main advantage of this cap model is that it reduces the weight of coins that have been inactive for a long time (because their value will be lower).
Many of these coins become permanently inaccessible due to lost wallet seed phrases. However, the market cap still gives it the same value as other coins, despite the fact that it cannot affect the price in any meaningful way. The realized cover helps to solve this problem.
If the realized cap is divided by the total number of coins in circulation, the “realized price” is taken. Unlike the normal price (which may be derived from the market cap), this realized price is not the value applied to each coin.
What the price represents rather than the mean is the cost base of the average holder in the Bitcoin market. It is the price at which the average investor gets/buys the coin.
In the Bitcoin to Bitcoin exchange rate history chart, you can see the history of changes in the value of the currency.
Looks like the price has been approaching the metric in recent days | Source: CryptoQuant
As shown in the chart above, the price of Bitcoin has been below the price realized during the bear market, but with the start of the latest rally in January, the asset managed to break through this level.
When the price is below the realized price, the average investor is now in a loss situation. These holding positions have historically been seen during bear markets, and these levels are resistance. In contrast, the period is long, which means that the price remains trapped.
Bullish winds usually take over with the price breaking above this level, and every time a successful break has occurred, this line has become a support instead.
With the latest decline in Bitcoin, the price is now retesting the price realized, now valued at about $19,700. This can be a true test for the rally as if a real transition to a bullish period has occurred, this level should be a support and help the price rebound.
A failure here could be bad news for 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 images from André François McKenzie on Unsplash.com, charts from TradingView.com, CryptoQuant.com