Understanding the Difficulties of Bitcoin: Why Realized Cap Only Indicates a Bear Market

As Bitcoin (BTC), the leading cryptocurrency in the market, continues to fall, recent insights from industry experts have highlighted key factors influencing the trajectory of BTC. According to Ki Young Ju, the CEO of the market research company CryptoQuant, the current Bitcoin price increase cycle may soon be coming to an end. This assertion is based on the concept of Realized Cap, a quantitative metric reflecting the actual capital flowing into the BTC market through on-chain activity. Insights from Ki Young Ju To understand better, the Realized Cap index operates on a simple premise: when Bitcoin enters a wallet, it indicates a purchase transaction, and when it exits a wallet, it indicates a sale transaction. By calculating the average cost basis for each wallet and multiplying it by the number of BTC held, Ju will be able to calculate the Total Real Capitalization. This index reflects the total actual capital that has participated in the BTC ecosystem, in stark contrast to market capitalization, which is determined by the last trading price on exchanges.

According to Ju, a common misconception is that a small purchase transaction, such as Bitcoin worth 10 dollars, only increases the market capitalization by that same amount. In reality, prices are influenced by the balance of buy and sell orders on the order book. Low selling pressure means that even modest purchases can significantly increase prices and thus market capitalization. This phenomenon has been significantly exploited by MicroStrategy (MSTR), which issued convertible bonds to buy Bitcoin, thereby increasing the paper value of its holdings far beyond the initial capital deployed. The main price of Bitcoin Currently, Bitcoin seems to be in a challenging position, falling below the important threshold of 80,000 dollars. With high selling pressure, even large purchases do not affect the price, as seen when Bitcoin traded near its all-time high of nearly 100,000 dollars. Despite the large trading volume, the price remains stagnant. It points out that if the Realized Cap is increasing but the market capitalization is flat or decreasing, it signals a downward trend. This indicates that while capital is entering the market, it is not translating into rising prices—a sign of a bear market. Conversely, if the market capitalization increases while the actual capitalization remains stable, this indicates that even a minimal new investment is pushing prices up, indicating a bullish market. Currently, data shows that Bitcoin is experiencing the following scenario: capital is flowing in, but the price is not responding positively. Historically, a significant market reversal takes at least six months to manifest, making a short-term price increase seem unlikely. To add to the complexity, market expert Ali Martinez has identified key resistance levels that Bitcoin must overcome to regain its upward momentum. Notably, there is a major resistance cluster at the $87,000 level, where the 50-day moving average, the 200-day moving average, and the downward trend line from the all-time high converge. In order for Bitcoin to continue its upward trajectory, experts affirm that BTC must surpass significant resistance points at $85,470 and $92,950. Additionally, support at $80,450 remains very important; failing to maintain this level could lead to further decline.

As of now, this leading cryptocurrency is trading at 78,379 dollars, recording a 6% fall on Sunday.