Bitcoin price versus realized price. Source: Glassnode.
What is the “realized” price of Bitcoin?
The realized price of Bitcoin is calculated by dividing the realized market capitalization by the supply. The realized market capitalization is computed by multiplying each Unspent Transaction Output or UTXO by the prevailing price when it was last moved. This metric should convey the cost of acquisition of the asset. Traditionally, the realized cap and price have ranged below the actuals; however, around Black Thursday (March 19), it flipped.
Bitcoin net unrealized profit. Source: Glassnode.
Is return to normality a good sign?
In the months that followed, the relationship has returned to the normal range. As of July 27, the actual price was almost double that of the realized price. Although a return to normality is always welcomed, the downside is that the most of the supply is currently in profit. Holders may therefore be tempted to realize some of the paper gains they have accumulated.
According to Glassnode's classification, the current phase could either be classified as Optimism heading towards Belief, or Anxiety willing to yield to Fear. A recent report by Bloomberg suggested that the former is more likely as it is expecting BItcoin to rise above $12,000.