Realized Price and Realized Cap
What is Realized Cap
The commonly used Market Cap is current price x total supply. However, this method can distort the market's actual value because it calculates coins lost years ago at current prices.
Realized Cap solves this problem. It evaluates each coin (UTXO) at the price when it was last moved and then sums them all up.
Realized Cap reflects "the total cost actually paid by market participants." It can be considered the market's true cost basis.
Calculation Method
Realized Cap
Realized Cap = Sum of (each UTXO's price at last movement x that UTXO's BTC amount)
For example, assume there are 3 UTXOs:
| UTXO | BTC Amount | Price at Last Movement | Contribution |
|---|---|---|---|
| A | 1.0 BTC | $20,000 | $20,000 |
| B | 0.5 BTC | $40,000 | $20,000 |
| C | 2.0 BTC | $60,000 | $120,000 |
In this case, Realized Cap = $20,000 + $20,000 + $120,000 = $160,000
Realized Price
Realized Price = Realized Cap / Current Circulating Supply
Realized Price can be understood as the average acquisition cost for the entire market.
Market Cap vs Realized Cap
| Category | Market Cap | Realized Cap |
|---|---|---|
| Calculation Basis | Current price | Each coin's price at last movement |
| Lost Coin Treatment | Calculated at current price (overestimated) | At last movement price (minimal impact) |
| Meaning | Market's current valuation | Actual cost basis of market participants |
| Volatility | High (responds immediately to price) | Low (changes only when coins move) |
| Application | General market size comparison | On-chain valuation baseline |
Realized Cap moves much more stably than Market Cap. Even if market price surges or plunges, Realized Cap doesn't change significantly unless most coins move.
Realized Price as Market Bottom/Top Signal
Bottom Signal: Market Price < Realized Price
When market price falls below realized price, it means on average, all holders are in a loss position. Historically, this state only occurred during extreme bear markets and was a very strong bottom signal.
| Period | Duration Below Realized Price | Subsequent Rise |
|---|---|---|
| Late 2011 | About 5 months | Major bull market followed |
| Early 2015 | About 7 months | 2017 bull market began |
| Late 2018 | About 4 months | 2020-2021 bull market began |
| Mid 2022 | About 6 months | 2023 upward reversal |
Top Signal
When Realized Cap increases rapidly, it means many coins are moving at high prices. This indicates large-scale profit-taking is underway and can be a warning of market overheating.
Rate of Change in Realized Cap
Not just the absolute value of Realized Cap, but its rate of change is also important.
- Rapid Realized Cap increase: Many coins traded at high prices. Market overheating or large accumulation.
- Gradual Realized Cap increase: Healthy accumulation. Price increases are gradual.
- Realized Cap decrease: Coins moving at a loss. Capitulation selling in progress.
- Stagnant Realized Cap: Minimal coin movement. Declining market interest or completed accumulation.
Relationship with MVRV
Realized Price and Realized Cap form the foundation for other on-chain indicators. Particularly, MVRV ratio is the ratio between market cap and realized cap, and is a core indicator for determining market over/undervaluation.
MVRV = Market Cap / Realized Cap
- MVRV > 1: Market price higher than realized price → Average profit state
- MVRV < 1: Market price lower than realized price → Average loss state
Cohort-Based Realized Price
Beyond the overall market realized price, analyzing the realized price of specific groups enables more detailed assessment.
Long-Term Holder (LTH) Realized Price
This is the average acquisition cost of coins held for 155+ days. Long-term holders are considered the market's "smart money," so when market price falls below LTH realized price, it signals an extreme bear market.
Short-Term Holder (STH) Realized Price
This is the average acquisition cost of coins that moved within 155 days. Short-term holder realized price acts as support/resistance similar to moving averages.
| Cohort | Meaning | Relationship to Market Price |
|---|---|---|
| Overall Realized Price | Market-wide average cost basis | Extreme bottom when below |
| LTH Realized Price | Long-term holder average cost | Panic zone when below |
| STH Realized Price | Short-term holder average cost | Acts as bull market support |
Practical Application Tips
Buy Timing Assessment
- Market price reaches near or below realized price
- Confirm exchange withdrawals are increasing
- Verify high long-term holding ratio in HODL Waves
- Confirm RSI is in oversold territory
When these conditions are met simultaneously, it has historically been an excellent buying opportunity.
Sell Timing Assessment
- Market price above 3x realized price
- Realized Cap rising rapidly
- Exchange inflows increasing
- Bollinger Bands upper band breakout
Limitations and Considerations
UTXO-Based Limitation
Realized Cap is based on Bitcoin's UTXO model. When applying it to account-based blockchains like Ethereum, methodological differences require careful interpretation.
Lost Coin Problem
Even coins that are effectively lost, like Satoshi Nakamoto's early coins, are included in Realized Cap at very low historical prices. This may cause realized price to be calculated lower than actual.
Single Use Limitation
It's difficult to pinpoint precise trading timing with realized price alone. Reliability increases when used alongside other on-chain indicators like MVRV ratio, SOPR, and NUPL.
Summary
Realized Cap is the aggregate value of all coins evaluated at their last movement price, and Realized Price is this divided by supply - representing the market's average acquisition cost. When market price falls below realized price, it has historically been a strong bottom signal, and this concept forms the foundation for major on-chain valuation indicators like MVRV, SOPR, and NUPL.
Next article: MVRV Ratio - Market Value vs Realized Value