Bitcoin had a rollercoaster ride in 2022, but it seems that the world’s largest cryptocurrency is off to a strong start in the new year.
The market has already seen a surge of about 70 percent in the first few months of 2023.
This has led many to wonder whether we are entering a new bull market for Bitcoin.
While it is difficult to say for sure, on-chain analysis can provide some insights into the long-term trends of the market.
Realized Cap as an Indicator
One way to gauge which phase of the market Bitcoin is in is by looking at the Realized Cap.
This measures the market cap based on the average rate at which all Bitcoin last moved addresses.
Historically, the Realized Cap has been a crucial support point for the price during bear markets.
Bitcoin typically loses this line at the lowest point of the bear market before starting a bull run after the first new break.
At the time of writing, the price has broken through the Realized Cap, which could indicate the start of a new bull market.
However, this is just one indicator and it is not enough to predict the future with certainty. Nonetheless, it is a positive development for the price.
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| ChainExposed.com |
Understanding the Realized Cap
The Realized Cap is essentially the average purchase price of all Bitcoiners. It is not surprising that this line often functions as an important support point in the chart.
People are less likely to sell an asset if it is at or around their purchase price. It is only when the price is significantly higher that people begin to sell again.
If history is a guide, we could say that a new bull market has begun.
Challenges Ahead
While the Realized Cap is a promising indicator, there are still challenges that could impact Bitcoin’s future.
Inflation remains a concern, and interest rates are higher than what Bitcoin is accustomed to.
These factors could cause a false breakout, so we need to be cautious.
It is important to remember that we are only at the beginning of the outbreak, and macro-level events can still make the market unpredictable.
Conclusion
It is difficult to say for sure whether Bitcoin is entering a new bull market in 2023. However, the surge in
price and the break of the Realized Cap are positive signs for the market.
On-chain analysis can provide valuable insights into Bitcoin’s long-term trends, but we need to be cautious given the challenges ahead.
While we cannot predict the future with certainty, it is important to stay informed and keep a close eye on the market.
