How much money is needed to change the market value of Bitcoin by $1.

Bitcoin’s realized cap would need to change by this much to change its market cap by $1

We discussed the impact of capital flowing into or out of Bitcoin on the asset’s market capitalization.

To make this calculation, the “realized cap” model for BTC is used. This capitalization model assumes that the actual value of any token in circulation is not the current spot price, but the price at which it moves on the blockchain.

Since the realized cap includes the price at which each investor purchased the token, its value essentially represents the total amount of money holders have invested in the asset. “Of course, there are nuances, but in my experience, this is a pretty close estimate.

Now, to understand what is the exact amount of change in market capitalization when realized caps change (meaning capital flows in or out), the analyst took the 90-day percentage change of both metrics and then took the ratio (first realized caps and then market capitalization).

Below is a chart of this Bitcoin ratio.

The graph shows in grey the ratio of realized market capitalization to the 90-day change in market capitalization. It is clear that the value of this metric has fluctuated widely over the years.

However, we can notice some interesting patterns. Historically, when the ratio exceeds 1.0, bull markets tend to taper off.

At this value, more than $1 would have to be invested in the asset to increase the market cap by $1. Of course, this is unsustainable, which is probably why the top may be hit when these conditions form.

Prior to 2016, the value of the indicator fluctuated between $0.45 and $1 as the Bitcoin market was still immature and few holders held onto their Bitcoin for the long term.

However, the 4-year median (red line) has dropped to just $0.25. “Hodler interest in Bitcoin is higher than ever due to education, and the liquidity circulating supply continues to decline.” “This is despite the high circulating supply.”

As the chart shows, BTC’s realized capitalization to valuation change ratio is currently below $0.25, meaning less than 25 cents is enough to move $1 in market cap.

“In summary, there is no perfect model between capital input and valuation output, but my gut feeling is that this is not the worst way to estimate.

Bitcoin Price

At the time of writing, Bitcoin is trading around $29,200, down 1% over the last week.