Bitcoin’s price in USD is still above its realization price

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In recent days, the price of Bitcoin in USD seems to be struggling a bit. 

But this difficulty is evident only in the short term, because already in the medium/short term things change. 

The concept of realized price

One of the metrics that it always pays to keep an eye on is the so-called realized price.

This is a metric that broadly indicates the average purchase price. 

In fact, it is obtained by dividing the realized cap by the number of existing coins, and the realized cap is obtained by multiplying the price of BTC at the time of the last visible move on the blockchain by each individual UTXO, and adding it all up. 

UTXO means Unspent Transaction Output, that is, BTC that is cashed in by individual addresses and not yet spent. 

While the realized price does not accurately represent the average purchase price, it is perhaps the best estimate we have for being able to imagine an average purchase price. 

Of course, the realized price also includes all the BTC that has been lost over time, so it is a default estimate. 

Currently, Bitcoin’s realized price is still only just above $21,000. 

Bitcoin: the average purchase price in USD

Although this is only a rough default estimate, the $21,200 realized price is definitely still far below the current price. 

Then again, although most people bought BTC in 2021, at the height of the bubble and at prices certainly higher than $21,000, it should not be forgotten that the realized price only takes into account the likely purchase prices of Bitcoin that have not yet been spent, i.e., still in the wallet. 

So it excludes, for example, those who bought in 2021 and sold in 2022.

Moreover, for every single BTC sold in 2022 at a low price there is someone who bought it, precisely at a low price, and whether they still have it in their portfolio affects the realized price calculation. 

Added to this is the fact that until 13 January 2023 the price of Bitcoin was below the $20,000 mark, and had been since 8 November 2022. 

In light of this, the estimate suggested by Swift would not seem to be absurd, although it is certainly approximated by default due to the fact that the BTC lost forever are also taken into consideration, which no longer have any value because they are absolutely unusable. 

It is worth noting that there are only 4 million BTC that do not appear to have been moved to blockchain in the past 5 years, and that there are more than 1 million that have instead been moved in the past month alone. 

In total there are just under 19.4 million Bitcoin, and given that, in the last year alone, i.e., following the implosion of the Terra/Luna ecosystem that caused the price of Bitcoin to fall below $30,000, almost 8 million appear to have been moved, which means that only slightly more than half have not moved in more than a year. 

In contrast, fewer than 3 million have moved from May 2020 to May 2022, which is far fewer than those moved in the past 12 months. 

The current price of Bitcoin in USD

Not only is Bitcoin’s current price above $26,000 far higher than the current realized price of about $20,000, but during the last bear-market the price of BTC has only been below the realized price for about seven months. Previously it had been above that threshold for more than two years. 

So it is not at all an anomaly that the price of BTC is above the realized price, although it is generally well above that threshold, and not just by 30% as it is now. 

It is worth noting that Bitcoin’s realized price rose above $20,000 for the first time in history in April 2021, which was when the first speculative bubble that marked the last big bull run was about to end. 

By contrast, in December 2020, when the price exceeded $20,000, the realized price was still below $9,000. However, this highlights how fast the realized price can also move, which doubled in about four months in early 2021. 

What is even more interesting though is that it has never exceeded $26,000, as Bitcoin’s maximum realized price was touched in April 2022, at the height of the bear-market, precisely at $26,003. 

When the price began to fall, at the end of April, the realized price also fell, until it reached the lowest level of the last bear-market in March this year, below $20,800. 

Therefore as long as the price of Bitcoin stays above $21,000 there seems to be no particular risk in the medium/long term, and as long as it stays above $26,000 as well, everything is absolutely normal.