Bitcoin had a dramatic 2022, but the new year has started more than strong for the market’s largest cryptocurrency. For the first months of 2023, there is a plus of about 70 percent in the books. This seems to be the first steps towards a new bull market, but can we also say that we are in a new bull phase?
Has the bull market started?
It is difficult to say whether a new bull market has actually started. In principle, it is starting to look more and more like it, but Bitcoin can sometimes do very unexpected things. A good way to determine which phase of the market Bitcoin is in is on-chain analysis. Especially if you take a closer look at the long-term trends.
The Bitcoin chart above shows Bitcoin’s current market cap (red line) versus the Realized Cap (orange line). Over the years, the Realized Cap has proved to be an important support point for price during bear markets. Usually we see Bitcoin lose that line at the lowest point of the bear market, only to start a bull run after the first new break.
At the time of writing, the price has broken through the Realized Cap and it seems that we can prepare for another bull market. This is of course only one indicator, which is far too little to be able to speak with any certainty, but it is certainly a promising development for the price.
What is the Realized Cap?
Bitcoin’s Realized Cap measures the market cap based on the average rate at which all Bitcoin last moved addresses. You can think of this line as the average purchase price for all Bitcoiners. In that respect, it is not surprising that this line often functions as an important support point in the chart.
After all, people are not easily inclined to sell an asset if it is at or around their purchase price. Only when the price is far above that do we often see that people start to sell again. If the past is a good predictor of the future, then we could say that a new bull market has begun.
However, we are only at the beginning of the outbreak and certainly on a macro level, things are happening right now that make the market a little less predictable. Inflation is still a problem and interest rates are somewhat higher than Bitcoin is normally used to. In that sense, it could also just be a false breakout, but for now it looks good.
