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Record cap achieved shows unprecedented economic investment in Bitcoin

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The Bitcoin Realized Cap is a nuanced and innovative metric for assessing Bitcoin valuation that differs significantly from traditional market capitalization.

Unlike market cap, which simply multiplies the current price of Bitcoin by the total number of coins in circulation, realized capitalization provides a more granular and economically meaningful overview of the Bitcoin market.

It does this by aggregating the value of all Bitcoins to the price they were last moved at rather than the current price. This approach can provide a more stable view of market valuation, less subject to the volatility associated with speculative trading and short-term market movements.

To calculate the achieved ceiling, you must take the value of each Bitcoin at the time of its last movement, then add these individual values ​​for all the Bitcoins. This means that if a Bitcoin was last moved when its value was $10,000, that specific Bitcoin contributes $10,000 to the cap, regardless of the current market price.

Realized capitalization reveals things about the Bitcoin market that are not immediately apparent through market capitalization.

First, it can provide insight into the investment behavior of Bitcoin holders. For example, a rise in the realized cap suggests that Bitcoins are trading at higher prices, indicating positive sentiment among investors. Conversely, a stable or falling realized cap may signal that most Bitcoin is not changing hands, perhaps implying holder conviction or a lack of new investment at higher price levels.

In addition, it can serve as an indicator of invested capital, less sensitive to speculative fluctuations. In times of high volatility, market capitalization can fluctuate wildly, but realized capitalization tends to move more smoothly, as shown in the chart below, reflecting a more grounded assessment of the Bitcoin market value. This stability makes it a valuable tool for investors looking to assess the underlying health of the market beyond the noise of daily price movements.

market capitalization achieved by Bitcoin
Chart comparing fluctuations in market capitalization and realized capitalization of Bitcoin from March 2021 to February 2024 (Source: Glassnode)

Bitcoin’s cap hit its all-time high on February 28, peaking at $473.8 billion. This means that on average, the Bitcoin network and its participants have never been more economically invested in BTC than they are today, based on the prices at which most Bitcoin was last traded.

Reaching an ATH in the realized cap indicates a broadening and deepening of the market foundations.

Unlike market capitalization, which can quickly inflate with speculative fervor, realized capitalization increases as a result of transactions that reflect real transfers of wealth and, by extension, a more enduring belief in the value of Bitcoin. Therefore, this ATH could be considered a more significant indicator of the growing acceptance and integration of Bitcoin into the financial portfolios of a wider range of investors.

Cap achieved by Bitcoin since the start of the year
Chart showing the ceiling achieved by Bitcoin from January 1 to February 28, 2024 (Source: Glassnode)

The Realized Cap HODL Waves data provides a fascinating insight into the behavior of Bitcoin holders and their contribution to the increase in realized cap. By analyzing changes in the distribution of Bitcoin holdings between different cohorts held over time over the past three days, we can determine which group is most active and how their actions have influenced the cap achieved.

On February 25, the distribution was as follows:

  • Bitcoins held for less than 24 hours represented 0.856% of the realized cap.
  • Bitcoins held between 1 day and 1 week contributed 5.8%.
  • The 1 week to 1 month cohort represented 15,571%.
  • Bitcoins held for 3-6 months accounted for 6.318%.
  • The 6 months to 1 year group represented 11.818%.
  • Finally, Bitcoins held for 1 to 2 years contributed 12.438%.

On February 28, a notable change occurred:

  • The share of Bitcoins held for less than 24 hours jumped to 5.828%.
  • Holdings between 1 day and 1 week fell to 4.851%.
  • The one week to one month cohort decreased significantly to 8,543%.
  • The 3-6 month group was reduced slightly to 6.209%.
  • Holdings over 6 months to 1 year fell to 11.338%.
  • The 1-2 year cohort decreased to 11.975%.
cap made HODL waves 3 years
Chart showing HODL cap waves made from March 2021 to February 2024 (Source: Glassnode)

From this data, the most significant change occurred in the under 24 hour cohort, which increased significantly from 0.856% to 5.828%. This suggests a significant influx of new investment or trading activity, where a large volume of Bitcoin quickly changed hands and was likely sold or transferred at higher prices, contributing to the realized cap increase. Such short-term holding indicates speculative trading or immediate responses to market conditions.

Decreasing percentages for the 1 day to 1 week and 1 week to 1 month cohorts, alongside slight declines in the longer-term holding categories, suggest a consolidation or shift of these groups toward the holding categories in the very short term. holding (<24h) due to transactions or in longer-term holdings not specified here. This could indicate a reallocation of assets within the market, where some short- and medium-term holders have decided to take profits or reallocate their investments, thereby contributing to the realized increase in the cap.

Therefore, the rise in realized capitalization appears to be significantly influenced by short-term market activity and trading rather than long-term holding strategies, as evidenced by the dramatic increase in cohort < 24 hours. Although there is activity across all cohorts, the predominant contribution to the increase in capitalization achieved during this period comes from those engaging in short-term trading.

This behavior reflects a market where price movements and immediate trading opportunities influence the realized cap more than long-term investors’ accumulation strategies.

Record Cap Made Shows Unprecedented Economic Investment in Bitcoin appeared first on CryptoSlate.

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