Does Bitcoin’s Price Truly Represent its Value? Here’s the Answer

Not controlled by any centralized authority, bitcoin price volatility has been quite successful in diverting the attention of masses. While the prospect of bitcoin is measured in terms of profit and loss mainly, the general perspective regarding bitcoin’s value is associated with its price only. However, according to a report by Coin Metrics, bitcoin’s price doesn’t convey a fair estimate of its value.

Moreover, the report elaborated that the market cap of bitcoin is overestimated, contributing to the false impression regarding bitcoin’s true value. Usually, the bitcoin market cap is calculated by multiplying all the coins in circulation with the price of bitcoin. For instance, if there are 17,905,500 bitcoin and the price of 1 bitcoin is $9,605, the market cap would be $171.9 billion.

However, as all the coins were not bought at the same time for a same price, the method for calculating the market cap isn’t accurate. At the back end, the method makes a wild assumption that all coins are possessing the same market value. Apart from the assumption, the method also counts all the stolen and lost coins, again not interpreting the true value of bitcoin.

Opposed to the market cap, realized cap suggested by Coin Metrics caters very well to the aforementioned assumption. Unlike the traditional market cap that includes unmoved coins as well, the realized market cap evaluates each coin according to the time it was last exchanged.

If a coin was last touched when it had a $2,600 worth, it would be priced at $2,600 rather than the current price. Similarly, all the coins are evaluated in this manner whenever the realized cap is calculated. By giving a more realistic metric to determine the significance of a crypto asset, the report concluded that realized cap is ‘a measure of the average cost basis of bitcoin holders.’ Cost basis is particularly referred to the original amount pooled in by the investors.

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Commenting on the realized cap of bitcoin, the report tells that it rose from mid 2017 till early 2018. Afterward, it struggled a bit and even decreased until May 2019. Gaining momentum from May, the realized cap reached to a new all-time high in August 2019. In addition to that, the report also mentioned another milestone reached by bitcoin in August 2019 as it read:

BTC also reached another milestone on August 23rd: all-time mining revenue surpassed $14 billion. We define “mining revenue” as the total USD value of all block rewards plus fees (both of which get paid out to miners) calculated on a daily basis, using that day’s price.

Going ahead of mining, the report also made a comparison of bitcoin’s realized cap in 2018 and 2019 and after analyzing both, the report deduced some findings. At the beginning of 2018, most of the people holding bitcoin were those who had bought it nearly for $20,000. But in August 2019, the concentration of bitcoin holders surpassed people who had bought it for roughly $10,000.

This shows that a majority of holders who bought bitcoin at a high price had probably sold their assets. Now, about 52% of the investors holding bitcoin are left who had bought bitcoin at a higher price than its current price. They would sell their bitcoins for a loss if they sold at the current market price.

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Down from 74%, now, the realized cap of bitcoin is left with holders who aren’t willing to sell their assets. The report concluded that as people holding bitcoin at the moment aren’t willing to sell, the price of bitcoin is heading toward stability and it’s real value.

Bitcoin is a decentralized cryptocurrency that only obeys the fundamentals of supply and demand. Therefore, the price of bitcoin can’t be manipulated. While realized cap gave an overall idea of holders’ investment in bitcoin, the report suggested that current bitcoin holders are less probable to sell their assets.

However, as buying and selling of bitcoin revolves around speculation, what holders will be up to when bitcoin price rises or fluctuates can’t be said for sure. Investors aiming to gain from bitcoin will always consult its real price rather than its value. Therefore, no matter what the real value is, bitcoin’s price will remain to be the primary concern of investors in the crypto space.

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Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at

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