/Bitcoin is at its lowest price according to this metric, and traders take advantage
Bitcoin is at its lowest price according to this metric, and traders take advantage

Bitcoin is at its lowest price according to this metric, and traders take advantage

Key facts:
  • The spot price of bitcoin is less than 10% of the realized price, says Glassnode.

  • When the spot price crosses the realized price curve, it would indicate a price floor.

The price of bitcoin is getting closer to its realized or effective price, which further drives the accumulation of this cryptocurrency. In its most recent Week-on-Chain report, the analytical firm Glassnode maintains that bitcoin reached this level last week by touching USD 26,513, its lowest value since December 2021.

The realized price or effective price of bitcoin is one of the oldest and most fundamental metrics in the analysis of chain data, the report states. It is calculated by dividing the sum of the values ​​of all coins at the time they were last moved, by the circulating supply. “Therefore, the realized price reflects an estimate of the aggregate cost basis of all coins in supply,” he states. This means that the realized price could be associated with a weighted average of all BTC purchased.

On the other hand, Glassnode highlights that the realized price “has provided strong support during bear markets and has provided signals of formation of market bottom when the market price trades below it”. In this sense, this metric can be very useful in this bear season since serves as an indicator when to buy or the percentage of losses that an investment can have , if we take into account that this is the potential minimum price that it will reach.

The table below shows previous bear market cycles and the proportion of time that prices traded below the realized price.

Proportion of bearish cycles with the price of BTC below the realized price. Source: Glassnode.

I know note that each downward cycle has had less and less relative duration below the realized price. “This may be due in part to the general market awareness of its existence (it was first discovered in 2018),” says Glassnode. In March 2020 there were only 7 days below the realized price, instead of months as in previous cycles, the report highlights.

“Last week when the price bottomed out at $26,513, the realized price traded at $24,000.” According to the report, prices plummeted due to the liquidations of both bitcoin and Luna, coupled with the collapse of UST and fears of Tether’s temporary decoupling from the dollar. This led to a drop in spot prices of just 9.5% of the realized price, as shown in the chart below.

Spot price and realized price of bitcoin since 2021. Source: Glassnode .

The graph above does not reflect the intersections of the spot price curve below the price curve made mentioned in the table. It happens that in the period after 2021, the spot price remains above the realized price.

The following graph, since 2011, shows all the opportunities in which the spot price is lower than the realized price. Indeed, it can be seen that each time such a crossover occurs, the price of bitcoin is at the bottom of the respective bearish phase.

Spot and realized price of bitcoin since 2011. Source: BuyBitcoinWorldwide.

Although in the current downward phase the spot price has not yet crossed the curve of the realized price, is less than 10% of achieving it . According to historical data, for this to happen, the price of bitcoin would have to drop below USD 24,000, although the duration of that intersection, if it really happens, would be a few days. This, according to the trend seen in the table above.

Bitcoin bearish trend drives accumulation

Traders bulls appeared to respond strongly to the price falling in the direction of the realized price, notes Glassnode. The chart and table below show bitcoin’s Accumulation Trend Score (ATS), which ranges in value from 0 to 1. As the ATS approaches 1, it indicates that a larger proportion of the market is increasing BTC from their wallets. Darker points on the price curve reflect a higher accumulation score.

As you can see, on Thursday, May 12, when the market was at its lowest point, the accumulation trend score was it reversed from very weak values ​​below 0.3, to yield values ​​above 0.796.

As support to the rebound of the price of Bitcoin to USD 30,000, the ATS took values ​​above 0.9 during the rest of the week, suggesting strong buy-side activity. This would indicate that some traders are preparing for a future bullish season by buying the “dip”, that is, when the price hits its lowest point.

After touching the minimum indicated on May 12, the lowest level reached this year, the price of bitcoin has remained in a range between USD 28,000 and USD 31,000. This recovery was associated with a resurgence of purchases, among which institutional investments stood out in the last two weeks. In recent days the price has stabilized around USD 29,000, as reported in this medium.

Read More