Bitcoin has been trading below its actual price for more than a month, with many signs that Bitcoin has experienced an outright sell-off at the lows. Therefore, Bitcoin has completed the bottom in the true sense.
This week, the Bitcoin market saw a brief upside opportunity, bouncing from $18,999 to the upper end of the consolidation range at $21,596. Markets were volatile earlier this week as headline U.S. CPI inflation hit a 40-year high of 9.1%. In addition, rising civil unrest, rising energy prices, and scarcity of resources in many countries around the world also challenge current market trends.
Against this backdrop, the slump experienced by Bitcoin and the broader digital asset market was one of the worst and fastest price declines in its history. The slump wiped out a lot of excess leverage in the system and pushed the price of Bitcoin below its cash-out price (the estimated base cost for BTC holders).
In this article, we examine the current Bitcoin market structure from the perspective of unrealized (coins held) and realized (coins spent) losses across various participant groups. The purpose of the study was to measure whether there is still similar sell-side weakness compared to previous bear cycle lows. These tools can help build the case and gauge the probability of a bear market bottom forming around $20,000.
Bitcoin: The price of the twenty-ninth week
realization of value
Before beginning this post, we will first define what we mean by realized and unrealized value, as these concepts will serve as the basis for subsequent insights.
Realized value (coins spent) is the difference between the value of a unit of coin when it is disposed of and when it is purchased on-chain. For example, a participant buys 0.5 BTC for $40,000 and withdraws it from the exchange. Participants then reload the exchange for $20,000 and sell it. Here, they have a realized loss of 0.5 * ($20k – $40k) = -$10k.
Unrealized value (unspent coins) is the difference between the current value of a unit of coin and the value at the time of the…