How Low Can Bitcoin Go? Here’s what the different pricing models say
The Bitcoin bear market has continued recently as the crypto has failed to sustain its upward momentum. How low can the price go before a bottom is reached?
Bitcoin price models set different targets for the cycle bottom
A recent post from CryptoQuant has discussed the different price models for BTC and where they might suggest a potential bottom to be.
Before looking at the data of these price models, it is best to first gain an understanding of the main Bitcoin models of capitalization.
The normal market value of the crypto is calculated by taking the sum of the entire circulating supply and multiplying it by the current BTC price.
Another method of capitalization is “realized ceiling”. Where this model differs from the regular market cap is that instead of taking the most recent value of BTC, it weighs each coin in circulation against the price that particular coin last moved to, and then takes a sum for the entire supply.
Next is the “average cap”, which simply gives us the average market cap for the entire lifetime of Bitcoin by summing the market cap for each trading day and dividing 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 its own “price” (which, in the case of the market cap, will naturally be the normal prevailing price).
Now, here is a chart showing the trend of these Bitcoin prices derived from these cap models:
Looks like the price has dipped below realized price | Source: CryptoQuant
Historically, bear market bottoms for Bitcoin have usually formed when the price has traded below the realized price. Currently, the cryptocurrency satisfies this condition.
However, the realized price alone cannot point out the bottoms, and this is precisely where the other models come in.
As you can see in the chart, two other prices, the “delta price” and the “thermo price” are also there. The former of these is derived through the “delta cap”, which is defined as the difference between the realized cap and the average cap.
In the 2015 and 2018 bears, the bottom was reached when Bitcoin fell to the delta price. Since this calculation has a value of around $14.5k right now, it means that the crypto could potentially go down another 28% from here before the bottom, if the previous trend follows this time as well.
In terms of the thermo price, this model is similar to the realized price, except that instead of weighing against the price that each coin last moved to, this method uses the value at which the coins were first mined.
The bottom in 2011 took place 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 large, it is unlikely to act as the bottom indicator for this cycle.
BTC price
At the time of writing, Bitcoin’s price is hovering around $20k, down 5% in the last week.
BTC continues to consolidate | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, CryptoQuant.com
