Bitcoin’s “delta capitalization” pattern may indicate that around $15,000 may be a potential bottom for the cryptocurrency’s price.
Previous Delta Cap Trend Shows Bitcoin May Still Face More Downside Before Bottom
As explained by an analyst at CryptoQuant MailThe market capitalization of Bitcoin is now below the maximum achieved, but still above the delta ceiling.
Before taking a look at the data, it is best to first get a basic understanding of the three major capitalization models of Bitcoin.
Normal market capitalization is calculated by taking the total number of coins currently in circulation and multiplying it by the price of bitcoin at the moment.
The “detective cover“It works a little differently; instead of hitting all coins at the same rate, this model weighs each coin at the rate it was last moved.
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For example, if there are 2 BTC in circulation and the current price is $19K, then the normal market capitalization is simply $38K. However, if one of these coins was dealt for the last time, say, at $15,000, and the other at $19,000, then the maximum achieved would be $34,000 instead.
Now, bitcoin’s “delta cap” is defined as the difference between the maximum achieved and the average market cap. The normal average market cap is taken here over the entire history of cryptocurrencies (and naturally a file moving average).
The chart below shows the trend in the various market caps for 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’s market cap has recently fallen below the maximum achieved. However, it has not yet fallen low enough to touch the delta cap.
Historically, the value of the cryptocurrency has bottomed out whenever the market capitalization is between the other two.
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In 2020, the coin hit bottom after market cap fell a bit below the maximum achieved, but in 2018 the scale fell a bit below delta cap before bottoming.
This past trend may indicate that the point around the delta ceiling may be the potential minimum for how deep a currency’s price slide will be. If so, Bitcoin will likely drop to or just below $15,000, before the current maximum touches delta cap and bottom patterns.
At the time of writing this report, Bitcoin price It is floating around $19.3K, down 9% in the last 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