The data from a key on-chain indicator could insinuate that Bitcoin is not presently in a phase that would place its price at substantial risk of experiencing a correction. The 365-day growth rate of Bitcoin, a crucial determinant of the cryptocurrency’s health, is currently positioned below the historical overheated zone.
Renowned cryptocurrency analyst, Axel Adler Jr, has scrutinized the recent trend of Bitcoin’s ‘Growth Rate’, an essential metric for understanding the kinesis of this digital currency. The Growth Rate serves to closely monitor the variance between fluctuations transpiring in the Market Capitalization and Realized Capitalization of Bitcoin.
Market Capitalization is simply a valuation of the total existing supply of the cryptocurrency calculated at the prevailing spot price. The Realized Capitalization, however, is a tad more intricate.
The concept of Realized capitalization emerges from an on-chain capitalization model for the asset which deems the “real” value of any coin, in circulation, to be synonymous with the price at which it last changed hands on the blockchain.
Given that the last transaction of any coin was possibly the final instance of its ownership transfer, the price at that time would function as its present cost basis. As the Realized Capitalization consolidates this price for every coin of the asset, it generates an aggregate of the cost basis of each coin presently in circulation.
Put simply, the Realized Capitalization gauges the total quantum of capital that investors have adopted to buy their Bitcoin. Hence, alterations in the Realized Capital would signify the capital inflows or outflows taking place for the cryptocurrency.
The Growth Rate, by keeping a tab on how changes in the Realized Cap are mirrored in the Market Cap, provides insights into the impulsive behaviour of the market towards capital flows.
The trend in the 365-day moving average (MA) of the Bitcoin Growth Rate, over the past decade, demonstrates that since early 2023, the growth rate has been veering towards positive levels. This signifies that the Market Cap has been evolving at a rate that outpaces the Realized Cap.
At this moment, the indicator is settled around the 0.001 mark, a comparatively high level. Therefore, it’s implied that capital inflows have vigorously been fuelling the price. Historically, when euphoric phases seize the market, the probability of tops transpires when the Market Cap skyrockets in contrast to the Realized Cap.
From the chart, it is noticeable that recent levels of the metric, albeit high, have yet to surpass the 0.002 mark, the threshold beyond which corrections have historically become a likelihood.
In March, the Bitcoin registered its all-time high, which in turn identified the peak for the ensuing rally when the Growth Rate had soared above this very level.
Despite falling under $67,000 yesterday, Bitcoin has since encountered a recovery surge that has pushed its price back above $69,300. The bounce prompts speculation that the recent plunge in Bitcoin’s price is on the verge of being wholly nullified.
