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Last Chance to Buy Bitcoin at $20K? One On-chain Indicator Signals BTC/USD May Have Bottomed

After Bitcoin lost more than 70% from the all-time high, which it reached exactly one year ago, the crypto market entered one of those brutal bear phases that received the “Crypto Winter” moniker. During times like these, the questions on crypto investors minds are always the same:

• Is Bitcoin dead?
• Is crypto over?
• If not, when will the moon-bound price action resume?

Many analysts have tried to answer the last question during previous market cycles in Bitcoin’s 13-year history, but most of the fair value indicators used amounted to nothing more than quantitative snake oil. For instance, such was the fate of Stock-to-Flow indicator developed by a pseudonymous Twitter user, Plan B.

Even Ethereum co-founder, Vitalik Buterin, who has typically been uncritical in the media, associated Stock-to-Flow with being harmful.

“Stock-to-flow is really not looking good now,” said Buterin, in a June 2022 tweet. “I know it's impolite to gloat and all that, but I think financial models that give people a false sense of certainty and predestination that number-will-go-up are harmful and deserve all the mockery they get.”

Historically, there has only been one indicator with a perfect track record of identifying when to start accumulating Bitcoin for the next bull: Realized Price.

What is Realized Price?

Realized Price takes into account the total number of mined Bitcoins, the historical market price of BTC, and the time when coins were last transacted. This metric is powerful because it provides an estimate of the average price that people paid for 1 BTC at a certain moment in time. Realized Price is calculated by multiplying the number of BTC in every unspent output from the current UTXO set by the Bitcoin market price at the time that output was created and then dividing the sum of those products by the total number of Bitcoins mined at the time.

Every instance of the Realized Price of Bitcoin dipping below the Market Price is associated with a major crypto market bottom and a period of covert accumulation by smart money amid dampened BTC price volatility (see Figure 1).

As of the time of this writing, the Realized Price of Bitcoin is approximately $21,000 while the Market Price has been fluctuating around $20,000. If history is any guide, we may be seeing an extremely rare bargain basement pricing for the reserve currency of crypto! At the very least, today’s sats stackers can have a peace of mind knowing they are paying less for their precious coins now than most investors paid before.

Meet the Author

Alex Mologoko, Sr. Blockchain Data & Analytics Expert

Alex started his TradFi career in 2000, most recently at J.P.Morgan, specializing in Electronic Execution, Algorithmic Trading, and Quantitative Analytics. In 2016, he found out about Ethereum and decided that smart contracts were a revolutionary technology and the future of finance.

Prior to joining Elementus, Alex was the Head of Digital Assets and Markets Research at CipherTrace, where he investigated crypto market manipulation, DeFi exploits, and crypto scams. He also developed privacy coin tracing methods. Alex holds both MS in Computer Science and MBA in Finance degrees.