As the cryptocurrency has lost its upward momentum, bitcoin has been in a bear market for a while. What is the lowest price bitcoin can go before it reaches a bottom?
Bitcoin Price Models Have Different Goals for The Bottom
CryptoQuant posted a recent article about BTC pricing and what they might suggest as a bottom.
Before looking at the data of these price models, it’s best to first get a grasp of the major Bitcoin capitalization models.
To calculate the market capital of crypto, take the total supply of crypto and divide it by current BTC prices.
Another capitalization method is the “realized cap.” Where this model differs from the usual market cap is that instead of taking the latest value of BTC, it weights each coin in the circulation against the price at which that particular coin last moved, and then takes a sum for the whole supply.
Next is the “average cap,” which simply gives us the mean market cap for the entire life 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 their own “price” (which, in the case of the market cap, will of course naturally be the normal current price).
Here is the chart showing how these Bitcoin prices have changed over time based on these cap models.
Source: CryptoQuant| Source: CryptoQuant
The bear market bottoms in Bitcoin are usually created when the bitcoin price drops below its realized value. This is currently the case.
However, the realized price alone can’t pinpoint 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.
The bottom of the bears in 2015 and 2018 was when Bitcoin fell to the delta price. This metric currently has a value around $14.5k, which means that the crypto can potentially fall another 28% from the top, provided the trend continues.
This model, which is also known as the thermo price or realized price, uses instead of weighting against each coin’s last movement price to calculate the actual price. It takes into account the original value when the coins were first extracted.
When Bitcoin reached this level, the 2011 bottom occurred. CryptoQuant points out in the post, however, that since the gap between the current price ($20k) and the thermo price ($2,365) is too large, it’s unlikely that it acts as the bottom indicator for this cycle.
BTC Prices
At the time of writing, Bitcoin’s price floats around $20k, down 5% in the past week.
BTC keeps consolidating | Source: BTCUSD on TradingView
Image by Dmitry Demidko, Charts from TradingView.com and CryptoQuant.com