Bitcoin price has dropped more than 50% from its all-time high. During times like these, people wonder whether the bottom is near or not. Nobody wants to sell the bottom. And nobody likes to buy a dip that keeps on dipping either.
There are a lot of indicators. Some of which we call “on-chain” indicators and some are technical price indicators. For example, the relative strength index (RSI) on the daily time frame. When it hits 20 or lower, then it’s really something. Or what about Fibonacci levels? All great indicators to get some sense of price action. But does it make it a great entry indicator? It may be useful, but it’s always relative to the previous price action, which isn’t a fundamental threshold. It’s technical.
So, which indicator has a fundamental threshold? We like to watch the realized price closely. In an earlier written article, we explain how we look at the bitcoin (market) price with the realized price as an anchor. When the price of bitcoin goes below the realized price, it means that, on average, bitcoin HODLers are at a loss. Early investors may still be in profit, but most investors are at a loss.
On January 31, 2022, the realized price was around $23,900. In the history of bitcoin, it rarely happens that the market price reaches this level or even goes below it. But even when it happens, it doesn’t exactly mark the bottom. Yes, it’s a darn good place to stack some extra sats, but will the price stop from dropping at this level? On January 14, 2015, it most certainly did not. With a realized price of $310.91 and a market price of $172.21, it went a lot lower. Maybe this was because the second peak of the 2013 bull market was an outlier, and the realized price was front running the “normal tech adoption curve.” We might elaborate on that hypothesis in a different article, but for now, let’s focus on an entry spot.
ADJUSTED REALIZED PRICE
There were times that the bitcoin price went through a large correction and the price recovered again before touching or getting near the realized price. Since 2020, large investors are stepping in and are changing the rules of the game. Michael Saylor likes to add bitcoin to his balance sheet when the price drops and President Bukele is also smashing the buy button on his phone when price dips. So, it might take years for the bitcoin price to reach the realized price again. It may never happen again, ever. Are you willing to wait for that?
So, what if we adjust the realized price for lost coins. Coins that haven’t been moved for over seven years, may never move again. The adjusted realized price is around $30,649 (depends on how you calculate it). This might sound more realistic. We already saw a wick to $33,000. But even this adjusted realized price isn’t always a perfect entry indicator. READ MORE
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