Bitcoin Retests Realized Price, Will Rally Be Saved?

On-chain data shows that the Bitcoin price is now making a retest of realized price, could this help push the asset’s value back up and restart the rally?

Bitcoin is now retesting its realized price of around $19,700

As an analyst in a CryptoQuant post pointed out, BTC needs to maintain this level if the positive outlook continues. The “realized price” here refers to a price derived from a Bitcoin capitalization model called the “realized cap.”

Unlike the normal market value, which sets the value of all coins in the circulating supply as the same last BTC price, the realized value says each coin’s “true” value is the price at which it was last moved.

The main advantage of this cap model is that it puts less weight on coins that have been dormant for a long time (as the price would have been much lower then).

Many such coins have become permanently unavailable due to lost wallet seed phrases. However, the market cap still places the same value on them as any other coin, despite the fact that they can no longer affect the price in any meaningful way. The realized cap helps reduce this problem.

If the realized rate is divided by the total number of coins in circulation, the “realized price” is obtained. Unlike the normal price (which can similarly be obtained from the market value), this realized price is not a value that applies to every coin.

Rather, what the realized price means is the cost basis of the average holder in the Bitcoin market. It is the price at which the average investor bought/bought their coins.

Here is a chart showing the trend in the realized Bitcoin price over the last few months:

Looks like the price has been approaching the metric in recent days | Source: CryptoQuant

As shown in the graph above, the Bitcoin price had been below the realized price during the bear market low, but with the start of the most recent rally in January, the asset had managed to break through the level.

When the price is below the realized price, the average investor is currently in a state of loss. Such holding conditions have historically been seen during bear markets, and the level has acted as resistance. In contrast, such periods have lasted, suggesting that the price has remained trapped below it.

Bullish winds have usually taken over with the price breaking above this level, and every time a successful break has occurred, this line has turned into support instead.

With the recent decline in Bitcoin, the price is now retesting the realized price, which is currently valued at around $19,700. This could be a true test of the rally, as if a real transition towards a bullish period has taken place, this level should act as support and help the course recover.

However, a failure here could be bad news for the cryptocurrency, as it could be a sign that the bear market is not over yet after all.

BTC price

At the time of writing, Bitcoin is trading around $19,900, down 11% in the last week.

BTC has plunged in the past day | Source: BTCUSD on TradingView

Featured image from André François McKenzie at Unsplash.com, Charts from TradingView.com, CryptoQuant.com