While the crypto industry suffered a dark phase last year, most Bitcoin holders are still enjoying profits.
According to recent data from IntoTheblock, an on-chain analytics firm, 59% of Bitcoin holders are profitable as the coin is trading above the current “realized price,” which is the cost basis of the average Bitcoin holder.
Analysts define realized price as a metric that measures the price of all BTC currently in supply at the rate they were bought. The value obtained is then divided by the BTC in the circulating supply. The result of the division gives an “average cost basis,” which is then used to describe the realized price.
Realized price differs from the spot market price because the latter indicates Bitcoin’s current price based on real-time supply and demand. Like any other asset, BTC prices are massively determined by market forces, with the “hype” element, describing sentiment, another factor to consider.
That more than half of Bitcoin holders are profitable at spot rates is important. Realized price helps judge the overall economic state of the Bitcoin market. In addition, the realized price can be used in technical analysis to mark resistance or support levels.
Technically, the realized price exceeding the market price indicates that some Bitcoin holders are in profit. On the other hand, if it drops lower than the market price, then on average, a section of market participants is in red.
Parallel on-chain streams show that the realized price of Bitcoin is around $19,700. When this figure is compared with the spot Bitcoin price presently at over $20,700, it means 59% of coin holders are sitting on profits, a net positive for the ecosystem.
This development is a shot in the arm for hodlers, considering the sharp contraction of prices over the past few months. Then Bitcoin plunged around $69,000 in November 2021 to slightly over $15,000 in 2022.
The on-chain data is analyzed and interpreted to gauge the state of the market. The interpretation, in turn, could massively influence sentiment and determine how retail traders act based on price action. The price of Bitcoin touched around $21,600 earlier this week, and on-chain statistics show more than half of Bitcoin holders are in profit. Only 38% of the market participants are out of money.
Even as Bitcoin appears to recover, there must be a comprehensive breakout to solidify and revive demand. However, based on the recent Bitcoin price action, most holders appear to profit after extended losses.
Data analysis shows that holders had been losing since mid-August last year. The situation worsened in subsequent months when fear, uncertainty, and doubt swept across the crypto sector and Bitcoin markets, pushing the asset even lower. One of the reasons for the decline was the unexpected collapse of the crypto exchange FTX.
As of early November, Bitcoin had dropped by over 65% from its peak in 2021 and highlighted the level of angst across the board, pushing the realized price even lower.