Bitcoin Market Dynamics: On-Chain Trends & Realized Market Capitalization
Analyzing specific metrics using on-chain data can give investors a closer look at market trends and how they relate to historical examples, painting a unique picture of bitcoin’s relative strength.
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Bitcoin Market Dynamics
In today’s issue we want to zoom out and highlight some of the latest bitcoin market moves through the lens of on-chain data: realized price, profit-taking behavior and bitcoin supply levels.
Currently, bitcoin is trading at approximately 1.5x its realized price, which recently resurged past the $20,000 mark. This milestone provides an interesting perspective and other on-chain data helps us paint a more comprehensive picture. Following typical bitcoin capitulation events, the supply often gets constrained by the participants with the most conviction. Today, we find ourselves precisely in such a phase: a mere 13% of circulating supply is held on exchanges and in the hands of short-term holders.
However, it’s important to note that while current price action and realized profits do not necessarily support the notion of a full-fledged bull market, we thus far have witnessed previous realized losses/on-chain capitulation turning into a small yet steady stream of profits (old coins moving at a higher price level than they were acquired for).
As shown below, the market-value-to-realized-value metric paints a picture of the birth of a nascent new bull market, with valuations no longer at bottom-barrel levels but still far from relatively overpriced, currently ranking in the 39% of historical readings.
Looking at the rate of change of the realized price, the historical analog of today’s market look to be the early months of 2016 and the summer of 2019, where price had sufficiently rebounded off the lows, with most of the bleeding finally over, as the market consolidates amid constrained supply conditions and a growing network effect of real world adoption.
Realized Cap, Not Market Cap
The logarithmic chart of bitcoin’s realized market capitalization, reflecting the aggregate value of all bitcoin at their last traded price, demonstrates the asset’s resilience. Unlike market cap, which is the product of circulating supply and current price, the realized cap shows the precise value of each bitcoin UTXO, courtesy of its transparent ledger.
Realized cap paints a far different picture regarding bitcoin’s monetization compared to what you may be led to believe when viewing bitcoin’s hyper-volatile mark-to-market exchange rate.