Bitcoin’s “delta capitalization” model may suggest that around $15,000 could be a bottom for the cryptocurrency’s price.
Past Delta Cap Trends Show Bitcoin May Still Face More Downside Before Bottoming Out
As one analyst in CryptoQuant explained postalthe BTC market cap is now below the realized cap, but still above the delta cap.
Before looking at the data, it is best to have a basic understanding of Bitcoin’s three capitalization models.
Normal market cap is calculated by multiplying the current total number of coins in circulation by the current BTC price.
This”Realize the upper limit” works a little differently; instead of multiplying all coins by the same price, the model multiplies the weight of each coin by the price of its last move.
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For example, if there are 2 BTC in circulation and the current price is $19k, then the normal market cap is only $38k. However, if one of the coins was last traded at $15,000 and the other was at $19,000, the realized cap would be $34,000.
Bitcoin’s “incremental cap” is now defined as the difference between the realized cap and the market cap average.The average of the normal market caps here covers the entire history of the cryptocurrency (which is naturally moving average).
The chart below shows the trend of different market capitalizations of BTC.
The normal market cap still seems to be above the delta cap at the moment | Source: CryptoQuant
As you can see in the chart above, Bitcoin market cap recently fell below its realized ceiling. However, it still hasn’t dropped enough to hit the delta cap.
Historically, the value of cryptocurrencies has formed a bottom whenever the market cap is between the other two caps.
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In 2020, the coin bottomed out after the market cap was slightly below the realized cap, but in 2018 the metric was even slightly below the delta cap before bottoming out.
This past trend may suggest that the point near the upper delta could be a possible lower bound on how far the coin price falls. If so, Bitcoin could drop to or just below $15,000 before the current cap hits a delta cap and a bottom forms.
As of this writing, price of bitcoin Floating around $19,300, it’s down 9% over the past week.
BTC has gone down over the last few days | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, CryptoQuant.com