An analyst has explained how Bitcoin’s bottom in the current cycle may not follow the same pattern as historical bear markets.
Bitcoin Could Bottom Around True Mean Price Instead This Time
In a new post on X, Checkonchain co-founder Alec Dejanovic has talked about a couple of pricing models related to Bitcoin. The first of these is the “Realized Price,” keeping track of the cost basis of the average investor on the BTC network.
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When the BTC spot price is trading above this level, it means that the network as a whole is in a state of net unrealized profit. On the other hand, the asset being under the metric suggests that the average token is being held at some loss.
This indicator has displayed an interesting relationship with the cryptocurrency in the past. “Historical Bitcoin bears usually bottom around the Realised Price level,” explained Dejanovic.
Below is the chart shared by the analyst that shows this effect in action.
As is visible in the graph, the 2015, 2018, and 2022 bear markets all found their bottoms when the Bitcoin spot price plunged under the Realized Price. Even the COVID crash in 2020 bottomed out below the indicator.
The explanation behind this pattern could lie in the fact that below this line, the majority of the network can be considered underwater, so there wouldn’t be many profit-takers left. In these conditions, resolute entities take coins off investors capitulating at a loss and selling pressure slowly reaches exhaustion, allowing BTC to regain its footing.
Today, the Realized Price is situated at $56,000. Considering the past pattern, perhaps this cycle’s bear market would also bottom out around or below this level. Dejanovic thinks things can go differently this time, however, saying, “with ETF flows remaining resilient and no FTX-style fraud in sight, that target feels excessive.”
If not Realized Price, then where else could Bitcoin find its bottom? The answer may be the second price model listed in the chart: the True Mean Price. This metric functions similarly to the Realized Price, except for the fact that it represents the cost basis of just the active market participants, not the entire network.
A chunk of the Bitcoin supply has become lost due to associated wallets no longer being accessible. As BTC is growing older, this supply is only increasing in size, making the Realized Price a somewhat inaccurate representation of the real network situation.
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By focusing on only the active part of the supply, the True Mean Price sidesteps this issue. Its value is currently $82,000, which is around where BTC found its recent low. “This could be the new line in the sand we are hammering out,” noted the analyst.
BTC Price
Bitcoin has shown a sharp jump during the past day that has taken its price back above $90,000.
Featured image from Dall-E, checkonchain.com, chart from TradingView.com
