Here’s why the current Bitcoin Bear may last a while longer
Bitcoin has been consolidating between the realized price and the balanced price for three months so far, here is why this may indicate that the bear market may still have some way to go before it ends.
Bitcoin is currently below but close to the realized price of $21.1k
According to the latest weekly report from Glassnode, the realized and the balanced price models are suitable for approximating the bottom formation area for BTC.
The “realized price” is a Bitcoin value model based on the idea of a realized cap. Simply put, what it represents is the cost base of the average incumbent in the market.
This means that when the true BTC price trades below this metric, the market as a whole enters a state of loss.
Another model for Bitcoin is the “balanced price”, which is calculated by taking the difference between the realized price and the transferred price.
The former of the two is, as explained before, the average cost basis, or the price the average investor “paid” for their coins. The latter model, the new “transferred price”, means exactly the opposite.
It is based on the price at which investors have sold their coins, thus representing the price at which they “spent” their BTC.
Because of this fact, the report explains that the balanced price “can be considered a form of a ‘real value’ model, which captures the difference between what was paid (cost-based) and what was used (transferred).”
Now, here is a chart showing the trend of these Bitcoin price models, as well as the true price, since the year 2014:
The time spent by the crypto in this range during the various cycles | Source: Glassnode's The Week Onchain - Week 44, 2022
As you can see in the graph above, the current realized price for Bitcoin is around $21.1k, while the balanced price is about $16.5k.
Historically, the crypto has consolidated between these two levels while the bottom formation period of the bear market has lasted.
In the 2014-15 cycle, BTC was trapped in this region for 10 months, while in 2018-19 it was stuck there for 5.5 months.
So far in the current bear, Bitcoin has spent a total of about three months in this region. Glassnode notes that the current cycle therefore still lacks the duration observed in previous ones.
Right now, the crypto is approaching a retest of the upper limit of this range, but if this bear is also at least as long as the historical ones, the crypto could be rejected back down.
BTC price
At the time of writing, Bitcoin’s price is hovering around $20.5k, up 7% in the last week.
BTC holds strong above $20k | Source: BTCUSD on TradingView
Featured image from Daniel Krueger on Unsplash.com, charts from TradingView.com, Glassnode.com
