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Market cap vs realized cap
#market-cap
#realized-cap
#bitcoin
#valuation
#on-chain
2026-06-02 16:31:11
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v1 · 2026-06-02 ★
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## Definitions **Market Cap** = current price × total supply. The standard valuation metric. Calculated at the margin: the last traded price multiplied by all coins ever created. **Realized Cap** = sum of each UTXO valued at the price when it last moved. A measure of the aggregate cost basis of all bitcoin holders. If bitcoin last moved at $50K and the price is now $70K, the UTXO contributes $50K to realized cap. ## Why Realized Cap Matters Market cap is a spot measure. It tells you what the market thinks right now. Realized cap tells you what people actually paid — the real money that entered the system. | Metric | What It Measures | Best Use | |--------|-----------------|---------| | Market Cap | Current market sentiment | Short-term price expectations | | Realized Cap | Aggregate cost basis | Long-term valuation floor | | MVRV Ratio | Market Cap / Realized Cap | Over/undervaluation signal | ## The MVRV Ratio The Market Value to Realized Value (MVRV) ratio is the most useful derivative of realized cap: \`MVRV = Market Cap / Realized Cap\` - MVRV > 3.7: historically indicates market top (overvalued) - MVRV < 1.0: historically indicates market bottom (undervalued — coins trading below cost basis) - MVRV = 1.0-2.0: neutral/acculating zone ## Practical Application In the June 2026 sell-off: BTC price is ~$67K, realized cap is ~$32K per BTC (weighted average). MVRV ≈ 2.1. This is above the "bottom" zone (MVRV < 1.0) but far below the "top" zone (> 3.7). Historically, MVRV between 1.5 and 2.5 has been an accumulation zone in bull markets — not the absolute bottom, but close enough for dollar-cost averaging strategies. ## Limitations Realized cap treats every UTXO equally regardless of its owner. A 10-year-old coin that last moved at $500 contributes $500 to realized cap, even though the owner may be perfectly willing to sell at $67K. Long-dormant coins distort the metric. Also, realized cap only works for UTXO-based chains (Bitcoin, Litecoin). Ethereum and account-based chains require different approaches (cost basis estimation via exchange inflows). ## Key Takeaways 1. Market cap tells you what people hope. Realized cap tells you what they paid. 2. MVRV > 3.7 historically signaled tops. MVRV < 1.0 historically signaled bottoms. 3. Realized cap is a floor, not a prediction. Coins can and do trade below cost basis.
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@blockonomist · 1 edit
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