Research: Bitcoin realized cap vs. market cap reveals shift in safety flight dynamics

1 year ago

An investigation of marketplace headdress and realized headdress Bitcoin dominance (BTC.D) information performed by CryptoSlate suggests that users are progressively utilizing stablecoins, alternatively of BTC, arsenic a information flight.

Most are acquainted with marketplace cap, which is calculated by multiplying the circulating proviso by the existent token price.

Realized headdress is besides a valuation metric but differs from the marketplace headdress by substituting the existent token terms with the terms astatine the clip the token past moved. This method is said to springiness a much close measurement of valuation arsenic it considers and minimizes the effect of mislaid and irretrievable coins.

Glassnode estimated hodled oregon mislaid coins presently travel successful astatine astir 7 cardinal tokens, representing a important proportionality of the circulating supply.

If a token has ne'er moved the realized terms of that token is zero, and if a token has not moved successful a agelong clip its interaction is recorded astatine a overmuch little terms than the existent price. Therefore, progressive tokens marque up the bulk of the realized headdress valuation, giving a much holistic and typical fig versus marketplace cap.

However, realized headdress does not differentiate betwixt tokens that are lost/irretrievable and those that are successful heavy storage. Therefore, portion it does de-emphasize the interaction of lost/irretrievable coins, it is inactive not a cleanable valuation measure.

Despite that, marketplace headdress is overmuch much wide utilized than realized cap. For illustration successful the calculation of BTC.D.

Bitcoin marketplace dominance

Crypto markets are present implicit a twelvemonth since the marketplace top. During this time, BTC.D has been arsenic debased arsenic 38.9%, peaking astatine 48.6% successful June pursuing the Terra implosion and consequent formation to safety.

BTC.D is calculated utilizing the full crypto marketplace headdress divided by the Bitcoin marketplace cap. Currently, Bitcoin dominance is astatine 40.7%, hovering adjacent to rhythm lows.

In past carnivore markets, BTC.D has been overmuch higher, with the erstwhile rhythm carnivore seeing BTC.D deed arsenic precocious arsenic 73.9%.

Using realized cap, alternatively of marketplace cap, to cipher BTC.D gives a existent fig of 60%, which is much successful enactment with expectations of the bulk of users cycling into Bitcoin arsenic a information play during a carnivore market.

However, similar the marketplace headdress method for calculating BTC.D, the realized headdress method besides shows dominance astatine overmuch higher percentages (than 60%) during past carnivore markets, specified arsenic successful 2015, erstwhile it was astir 90%.

This begs questions astir changing marketplace dynamics successful 2022 versus 2015.

Bitcoin dominance utilizing realized cap

The emergence of stablecoins

Stablecoins are designed to enactment astatine a fixed worth careless of cryptocurrency terms volatility. They supply a means to participate and exit positions portion retaining superior successful the cryptocurrency market.

BitUSD was the archetypal stablecoin to travel to market, launching successful July 2014. But it wasn’t until 2015, erstwhile Tether launched, that stablecoins began making their mark. Before Tether became popular, investors tended to rhythm into Bitcoin during carnivore markets. But since astir 2017, this has not been the case.

The illustration beneath shows the Bitcoin: Stablecoin Supply Ratio (SSR) connected a macro downtrend since 2018, giving a existent ratio of astir 2. This metric illustrates the proportionality of Bitcoin proviso against stablecoin supply, denominated successful BTC.

When SSR is low, this indicates the existent stablecoin proviso has precocious buying potential. In different words, a debased SSR equates to a precocious proportionality of sidelined stablecoins.

When taken successful conjunction with the inclination of falling BTC.D, it suggests stablecoins are becoming the go-to prime for information flight.