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Inferno market analysis – another look at Realised Cap

Inferno market analysis – another look at Realised Cap


‘Realised Cap’ is closing in on $100 billion, giving us another way of assessing bitcoin price developments in the medium-term future.


In this report, we’re going to take a look at the longer-term picture for bitcoin. In particular, we’ll look at what’s been going on with the Realised Cap metric, which we’ve looked at before and which can help give a sense of whether BTC is under- or over-valued. 


Realised Cap – recap

We’re used to talking about the price and market cap of bitcoin, but those figures don’t mean a lot in isolation. What matters is the price people paid for those coins in comparison to the current price. Look at it this way: when we hit a new all-time high, no one who ever bought and held coins is taking a loss.


This is what Realised Cap is for. The measure was devised by the CoinMetrics team, and it looks at the price of BTC for every UTXO – in other words, how much coins cost when they were last moved. It’s not perfect, because people move coins all the time without selling them, but it’s much better than simple market cap, which doesn’t take into account factors like lost coins. You can see it as ‘an indicator of the sum of levels where groups of long-term, legit, buyer-hodlers entered into their Bitcoin positions, with local and immediate emotions and manias stripped out,’ say Adaptive Capital analysts Murad Madmudov and David Puell.


Where are we now?

As you can see from the chart, Realised Cap is gradually going up all the time. In a bull run, it goes almost vertical on the log chart. Where it gets really interesting, though, is comparing Realised and Simple market cap.


Right now, Realised Cap is around $100 billion – an all-time high. But that’s nowhere near the simple market cap of Bitcoin. In fact, prices would need to correct to around $5,000 before the average holder was in the red. So the average bitcoin holder is currently sitting on a 200% profit


At historic bubble peaks, that has been more like 400-500%. (Mahmudov and Puell put the ‘sell’ indicator factor at 3.7.) However, this doesn’t mean a predicted top around $20,000 again. Remember, Realised Cap is rising all the time. 


And this is one of the reasons why lengthy corrections within a bull market are important. They enable Realised Cap to rise to meet price, just like a moving average support line rising towards price in a consolidation period. What’s happening here is that coins are changing hands at a profit (on average) and so Realised Cap is increasing. It’s part of the churn that calms the market’s exuberance and allows the bull to run further.


The history of Realised Cap also confirms that this bull run, if it’s anything like previous ones, has a long way to go. At some point, price will dip below it, which is a clear buy signal. But we could be years off that.

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