Here’s why $22.4k could be the next level to break for Bitcoin

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As Bitcoin continues its strong rally, $22,400 could be the level to watch next, if this on-chain metric is anything to go by.

The price realized by the long-term holder of Bitcoin is currently around $22,400

According to Glassnode’s latest weekly report, BTC broke through all three market realized prices in April 2019. To understand the concept of “realized price”, the realized cap must first be examined. The realized cap is a capitalization model for BTC that values ​​each coin in circulation at the price at which it was last traded.

This is different from the usual market cap, which places the value of all tokens at the same current Bitcoin price. When the market capitalization is divided by the total number of coins in circulation, the BTC price is obtained, a fact that is not at all unexpected, because the market capitalization is calculated by multiplying the price by the number of coins to start with.

However, if this same idea is applied to the realized ceiling (i.e. if it is divided by the number of rooms), a sort of “realized price” can be derived. The significance of this price is that it is the cost base of the average holder in the Bitcoin market.

This implies that if the (normal) price of BTC drops below this realized price, the average investor can be thought to have entered a state of loss.

All market investors can be divided into two broad cohorts: “short-term holders” (STH) and “long-term holders” (LTH). The former includes investors who acquired their coins less than 155 days ago, while the latter consists of holders who have held their coins for more than that time.

Now, here is a chart that shows the realized price trend for the entire Bitcoin market, as well as that for STH and LTH, over the past five years:

Looks like the value of the crypto has surpassed all but one of these metrics | Source: Glassnode The Week On Channel – Week 3, 2023

As the chart above shows, the price of BTC was below these three realized prices for much of the bear market, suggesting that the average Bitcoin investor across all cohorts was carrying an unrealized loss.

However, in the most recent rally, the crypto has so far managed to break above the STH cost base ($18,000), as well as that of the broader market ($19,700). The LTH realized price of around $22,400 has yet to be reached by the coin.

A similar rally took place in April 2019, which marked the end of the 2018-2019 bear market. But during this rally, Bitcoin managed to break above all three realized prices.

If a similar transition occurs in this bear market as well, then the $22,400 level could be the one to watch, as a break above could imply a move back to bullish ground.

BTC price

As of this writing, Bitcoin is trading around $21,100, up 22% in the past week.

BTC continues to move sideways | Source: BTCUSD on TradingView

Featured image of Kanchanara from Unsplash.com, charts from TradingView.com, Glassnode.com

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