Bitcoin’s Historical Returns To Realized Price

btc realized price

Bitcoin’s price action in 2022 has been on a downtrend, leading many to analyze the current bear run experienced by the crypto market. During times like this, analysts line up to predict what the future could look like based on different models and indicators. A critical metric to consider is realized price. In this article, we will look at Bitcoin’s historical returns to realized price and the picture it paints for the short-term and long-term outlook of the BTC price. 

What Is Realized Price?

This is a key metric in understanding the Bitcoin market. This metric measures the average price at which each Bitcoin was last purchased or the market cost basis. It is an important metric because it establishes the line between profit and loss. 

Unlike the market price, realized price values the balance of coins held by a specific address based on the value it holds when it moves from one wallet to another. This is done based on the assumption that the movement from one wallet to the other is the time at which Bitcoin is purchased. 

Realized price follows the Bitcoin price. An uptick in Bitcoin value would also cause the average purchase value to increase. The opposite happens when there is a downturn. It is a simple way to tell if the majority of Bitcoin holders are recording a profit or loss. If the current Bitcoin price is above the realized price, traders are in profit. If the realized price is higher than the current Bitcoin price, holders incur a loss. 

Realized Price and The Bears  

The realized price becomes very relevant during times of market distress. A drop in the Bitcoin price below the realized price could sometimes signal huge sell-offs that usually turn into buying opportunities or a potential bottom for the cycle. 

Some traders begin to sell off after a drop below the realized price. These traders who have already recorded a loss at this point are not confident in holding on to losing positions, as they fear that the loss may get bigger than it already is. This is heightened by the bearish sentiment that sweeps through financial markets during a general downturn. From the media to social media communities, predictions of larger dips signal that there are more losses to come. Historically, Bitcoin spends a considerable amount of time below its realized price as a result of these sell-offs. 

However, as investor confidence increases, the cycle is changing. There have been several extended periods of market downturn, with notable ones witnessed in 2011, 2014, 2018, and 2019. 

Besides the 2011 bear market, every bear market has lasted shorter than the previous one. What’s more, the realized price has been a sound support line during bear markets. 

This table from Glassnode shows the connection between the bear market and realized price:

The Bitcoin price dropped heavily below the realized price and remained there for over 100 days in 2011. In 2014-15, the price stayed below the realized price for almost 300 days. The interesting thing to note is that with the 2014-15 cycle, the time spent under the realized price was shorter than the bear run’s total length.

The time spent below the realized price decreased in 2019-20 when the Bitcoin price almost bounced off the support mark at the realized price point. In 2019-20, the time spent under the realized price was just seven days, representing less than 3% of the length of the entire bear run. 

Per the data, it seems that smart money continues to watch the realized price line as a key indicator of the bottom and a signal for accumulation. The large capital that flows in after the realized price line is breached could explain the reason why time spent in that zone continues to decrease as time goes on. 

The Realized Price and the 2022 Cycle

The Bitcoin price dropped to $24,500 in May, marking its lowest price level since 2020. This drop also brought Bitcoin to the realized price for the first time in two years. It is important to note that touching the realized price differs from dropping below it. 

With the last drop below the realized price lasting for not more than a week, this may indicate that a drop below the realized price may happen really quickly. In a potential blink-and-you-miss-it event, traders who have set buy positions below the realized price are better positioned to catch the dip. 

This suggests that the best buying opportunity of this cycle could be very short. What’s more, a drop below the realized price may signal the bottom per historical evidence. If all bear runs are shorter than the previous and time spent below the realized price decreases per cycle, recovery may be on the horizon shortly after the Bitcoin drops below its realized price. 


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