Capitalization made Bitcoin indicates fall

The price of Bitcoin is always a controversial issue within the crypto community. Above all, when it comes to defining whether the same be located above or below where it would correspond, in an attempt to predict if the same will increase or decrease in the short term. And in this sense, the latest figures of the “Capitalization Made” of Glassnode would bring light to the situation. Indicating a possible fall in the price of BTC.

What is the capitalization carried out?

But before speaking of this, we need to explain in the first place that is the capitalization used, and why it is important that the same has reached a new historical record. Coming in at 106.7 billion dollars for the whole Bitcoin market.

Now, the capitalization undertaken is a statistical novel designed by the team of Glassnode. Which calculates the size of the market, according to the price that they had the Bitcoins in each unique address in the Blockchain, the last time I moved.

So, if we have 1 BTC in our wallet, bought to $ 7,000 and 2 BTC bought 8.000, Glassnode sum of the $ 7,000 first BTC and 8,000 the second, in place of calculating both the current market price.

Capitalization made Bitcoin reaches all-time high. Source: Glassnode

“The capitalization performed values different parts of the supply at different prices (instead of using the daily closing current). Specifically, it is calculated by valuing each UTXO by the price the last time it was moved“. In the words of Glassnode.

In consequence, the fact that the capitalization made in Bitcoin increase, indicates to us that many of the BTC currently in the market, have been purchased at high prices. That is, you probably have been recently acquired.

The consequences of this for Bitcoin

This situation has two possible readings for the crypto world, and especially for the price of Bitcoin. Thus, on the one hand, a new record in the capitalization carried out of the criptomoneda, you can give us a bullish trend in the market.

Since investors would be buying Bitcoins even if the same is found at a price close to $ 10,000. Which means that they expect that its price will increase and can generate profits.

However, there is a reading less optimistic of this figure. Therefore, the previous historical record in the capitalization carried out of BTC, was reached at the beginning of the month of march, just before the fall of 49% on the price of Bitcoin due to the crisis of the Coronavirus. Therefore, there is a causal relationship between this metric and an increase in the price of the criptoactivo.

This is especially true when attention is given to the graph that compares the market value of Bitcoin with the value of the same. A statistic that would put in relation to the capitalization carried out and the current price of BTC, to define a “fair value” of the criptomoneda according to the market conditions.

Fair value of Bitcoin indicates a possible drop in its price. Source: Glassnode

If this fair value is above the current price of Bitcoin, as before the great bullish rally of 2017, the same still has room to grow. On the contrary, if the same is below, it is possible that there is a fall in its price.

And as we see in the graph above, currently this value is below the market price. Opening the doors to talk about a possible fall in the price of BTC.

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