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Bitcoin (BTC) on-Chain Analysis: Market Cap Falls Below Realized Cap

2 mins
Updated by Geraint Price
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In Brief

  • Bitcoin's market cap has fallen below its realized cap.
  • This previously occurred during the Dec 2018 and March 2020 bottoms.
  • The market cap has been below the realized cap for one month.
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Be[in]Crypto takes a look at Bitcoin (BTC) on-chain indicators, more specifically the realized and market capitalizations and their relationship with each other.

Realized and market caps

The market cap (MC), is derived by multiplying the total number of coins that are minted with the current price of BTC. On the other hand, the realized cap (RC) uses a slightly altered formula. Instead of the current price, it uses the price at the time a transaction last occurred.

As a result of this modification, it can be seen as a more precise representation of the current value of BTC. One of the main features of the realized cap is the devaluation of coins that have not moved for a long time or are lost.

The main characteristic of bull markets is that RC usually increases at a rapid rate. This occurs because old coins are spent in order to realize profits. Conversely, RC falls in bear markets, when investors sell at a loss. 

Ratio between the two for BTC

The more interesting characteristics for determining the trend come from the relationship between the two capitalization formulas.

In Nov 2019, MC fell below the RC for the first time since that bull run began. It stayed there for five months (black circle), until the price finally moved above it. But, the bottom was reached less than one month after the market cap first fell below the realized cap. 

In March 2020, MC only briefly fell below RC and stayed there for less than one week (red circle).

In 2022, the MC fell below RC in June 12 (red circle). So, it has been below it for one month.

2020 BTC run
Market Cap/Realized Cap Chart By Glassnode

Going further back in time, MC fell below RC on Jan 1 2015. Afterwards, the bottom was reached on Jan 14, exactly two weeks after the first cross. However, MC stayed below RC for 11 months, more specifically until Nov 2015. This period was associated with consolidation in the price of BTC.

previous bull run
Market Cap/Realized Cap Chart By Glassnode

As a result of these readings, if previous history is any indication, BTC has either already reached a bottom or will soon do so. A movement of the market cap above the realized cap would be a decisive sign that the new bull market has begun.

For Be[in]Crypto’s latest bitcoin (BTC) analysisclick here.

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Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

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Valdrin Tahiri
Valdrin discovered cryptocurrencies while he was getting his MSc in Financial Markets from the Barcelona School of Economics. Shortly after graduating, he began writing for several different cryptocurrency related websites as a freelancer before eventually taking on the role of BeInCrypto's Senior Analyst. (I do not have a discord and will not contact you first there. Beware of scammers)
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