Bitcoin has been consolidating between the realized price and the balanced price for three months so far, here’s why this can suggest the bear market may still have some ways to go before it concludes.
Bitcoin is currently below, but near, the $21.1k realized price
Glassnode’s latest weekly report shows that both the realized and balanced price models could be suitable to approximating BTC’s bottom formation range.
The “realized price” is a Bitcoin value model based on the idea of realized cap. It is simply the average market price.
If the BTC’s true price falls below that metric, then the entire market is in a 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 mean cost-basis, or the price the average investor “paid” for their coins. The latter model, the new “transferred price,” signifies just the opposite.
It’s based on the price that investors have been selling their coins at, and thus represents the price at which they “spent” their BTC.
Because of this fact, the report explains that the balanced price “can be thought of as a form of a “Fair Value” model, capturing the difference between what was paid (cost-basis) and what was spent (transferred).”
Below is a chart that displays the Bitcoin price trend since 2014, along with the actual price.
The amount of time that the crypto took to complete this cycle. Source: Glassnode's The Week onchain Week 44 2022| Source: Glassnode's The Week Onchain - Week 44, 2022
You can see that Bitcoin’s current realized price hovers around $21.1k. The balanced price, however, is roughly $16.5k.
The crypto has historically consolidated at these levels, while the bear markets bottom formation periods have lasted.
BTC was held in the area for 10 years during the 2014-15 cycle. It was only released in 2018-19 for an additional 5.5 months.
Bitcoin spent approximately three months so far in this bear. Glassnode points out that this cycle still lacks the same duration as the preceding ones.
The crypto bear nears a retest at the top of this range. However, if the bear is longer than the historical ones then it might be rejected again.
At the time of writing, Bitcoin’s price floats around $20.5k, up 7% in the last week.
BTC remains strong at $20k. Source: BTCUSD tradingView| Source: BTCUSD on TradingView
Image by Daniel Krueger, Unsplash.com. Charts from TradingView.com and Glassnode.com.