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Glassnode’s model for tracking the “price multiplier” effect for Bitcoin could provide insight into whether the asset is near the top or not so far.
Bitcoin is currently seeing a 4-5x multiplier effect
In a new job On X, Glassnode’s lead on-chain analyst Checkmate discussed the “price multiplier” effect of Bitcoin. This effect refers to the fact that the capital flowing into cryptocurrency is not always (in fact, most of the time) the same as the change reflected in market capitalization.
To track the exact ratio between the two, Glassnode defined the “realized capital/valuation change ratio”. This indicator measures the amount of capital entering “realized capitalization” for each unit change in market capitalization.
Realized Cap refers to a capitalization model for Bitcoin that assumes that the real value of each coin in circulation is not the current spot price but the price at the time of its last transfer on the blockchain.
This last transfer could be considered at the previous time the coin changed hands, so that the cap achieved adds up the cost basis or acquisition value of all coins in circulation. In other words, Realized Cap is a model that measures the total amount of capital that investors used to purchase Bitcoin.
Here is now a graph which shows the trend in the ratio of realized capital/variation in BTC valuation over the last few years:
The data for the 90-day change in the metric | Source: @_Checkmatey_ on X
The chart above shows that Bitcoin’s realized capital to valuation change ratio (90 days) has recently been below the 4-year median of 0.25. As Checkmate notes, this model suggests that the current multiplier effect of BTC is around 4-5 times.
This means that for every $0.20 to $0.25 that goes into the realized capitalization, the market capitalization changes by $1. The chart clearly shows that the multiplier generally increased during bull markets.
“Bull market highs often correspond to capital inflows of $0.80 to over $1.0 needed to achieve a $1 change in market cap (unsustainable multiplier < 1x),” says Glassnode manager .
On the other hand, bear markets “often see increased volatility with capital flows of $0.2 having a $1.0 impact on MCap (5x multiplier),” according to the analyst.
Let us assume that this historical pattern holds. In this case, the current Bitcoin multiplier is still at relatively low values, which would imply that the cryptocurrency still has plenty of room before a potential high is reached.
Another curious trend in the ratio is also visible in the same chart. It appears that the 4-year median is decreasing over the years. This would mean that the market cap of BTC has, on average, become easier to change over time.
BTC Price
Over the past day, Bitcoin spot ETFs were finally authorized by the US SEC, and it would appear that the market reacted by buying this news, as the price has now surpassed the $48,000 level.
Looks like the price of the coin has shot up over the past day | Source: BTCUSD on TradingView
Featured image by Dmytro Demidko on Unsplash.com, charts by TradingView.com, Glassnode.com
Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold investments and, naturally, investing involves risks. You are advised to carry out your own research before making any investment decision. Use the information provided on this website entirely at your own risk.
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