The Bitcoin bear market has continued of late as the cryptocurrency has failed to maintain bullish momentum. How low can the price go before hitting a bottom?
Bitcoin price models set different cycle bottom targets
A recent post from CryptoQuant discussed the different pricing models for BTC and where they might suggest a potential bottom.
Before looking at the data of these price models, it is best to get an idea of the large Bitcoin capitalization models.
The crypto’s normal market cap is calculated by taking the sum of all circulating supply and multiplying it by the current BTC price.
Another capitalization method is the “realized ceiling”. Where this model differs from the usual market cap is that instead of taking the last value of BTC, it weights each coin in circulation by the price at which that particular coin last moved, and then a sum for that accepts entire offer.
Next comes the “average cap,” which simply gives us the median market cap for the lifetime of bitcoin by summing the market cap for each trading day and dividing by the crypto’s total age (in days).
Each of these cap models can be divided by the total number of coins in circulation supply to get its own “price” (which will of course be the normal current price in the case of market cap).
Now here is a chart showing the trend of these bitcoin prices derived from these cap models:
It looks like the price has fallen below the realized price | Source: CryptoQuant
Historically, Bitcoin bear market bottoms have typically formed whenever the price was trading below the realized price. Currently, the value of the crypto meets this condition.
However, the price achieved alone cannot make up the low points, and this is where the other models come in.
As you can see in the chart, there are also two other prizes, the “Delta Prize” and the “Thermo Prize”. The former is derived by the ‘delta cap’, which is defined as the difference between the realized cap and the average cap.
The 2015 and 2018 bears bottomed out when bitcoin fell to the delta price. With this metric currently trading around $14.5K, it means that if the past trend follows suit this time around, the crypto could potentially drop another 28% from here before bottoming out.
As for the thermal price, this model is similar to the realized price, except that this method is not weighted by the price at which each coin last moved, but uses the value at which the coin was first mined.
The bottom of 2011 occurred when Bitcoin reached this level. However, CryptoQuant points out in the post that since the gap between the current price ($20,000) and the thermal price ($2,365) is too large, it is unlikely to act as the bottom indicator for this cycle.
BTC price
At the time of writing, Bitcoin’s price is hovering around $20,000, down 5% over the past week.
BTC continues to consolidate | Source: BTCUSD on TradingView Featured image by Dmitry Demidko on Unsplash.com, charts by TradingView.com, CryptoQuant.com
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