The debate over whether Bitcoin (BTC) is overpriced or undervalued continues to captivate investors, traders, and analysts alike. With volatility being a hallmark of the cryptocurrency market, understanding Bitcoin’s true market value requires more than just tracking its price on a chart. One analyst, Axel Adler, has stepped into the conversation with a data-driven approach, leveraging on-chain metrics to assess Bitcoin’s current valuation.
Using key indicators such as Bitcoin Distribution by Realized Supply and 365-Day Price Change, Adler offers insights that go beyond surface-level price analysis. His findings suggest that Bitcoin is currently in a neutral market zone—neither significantly overvalued nor deeply undervalued—providing a balanced outlook for both short-term traders and long-term holders.
Understanding Realized Supply: A Valuation Benchmark
One of the most insightful tools in on-chain analysis is the Realized Supply metric. Unlike market capitalization, which simply multiplies the current price by total supply, Realized Supply calculates the total dollar value of all Bitcoins based on when they were last moved.
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This approach helps filter out "lost" coins and inactive holdings, offering a clearer picture of what active investors actually paid for their BTC. As Adler explains, Realized Supply reflects the network’s average cost basis—the collective "break-even" point for Bitcoin holders.
The valuation ratio is derived as follows:
Ratio = Bitcoin Price / Realized Supply
This ratio functions similarly to the price-to-earnings (P/E) ratio in traditional stock markets. A higher ratio indicates that the current price is significantly above the average cost basis, suggesting potential overvaluation. Conversely, a lower ratio may signal undervaluation.
Currently, Adler notes that this ratio sits slightly above its annual average. This implies that while Bitcoin is trading at a premium, it’s not in extreme territory. The market is essentially in a neutral state, showing neither euphoric overbuying nor panic-driven selling.
Historically, similar ratio levels were observed before major upward movements. For instance, just before Bitcoin surged from $74,000 to $107,000 in late 2024, the Realized Supply ratio was in a comparable range. This precedent suggests that the current neutral stance could precede another phase of growth—if macroeconomic and market conditions align.
The 365-Day Price Change: Gauging Momentum
Another critical metric in Adler’s analysis is the 365-Day Bitcoin Price Change, which measures the percentage increase in Bitcoin’s value over the past year. At present, this figure stands at approximately 30%.
A 30% annual return is impressive by traditional investment standards—far exceeding average stock market gains or bond yields. However, within the context of Bitcoin’s historical cycles, this number is still within a moderate growth phase.
Adler points out that during previous bull markets, this metric has climbed as high as 60% to 70% before profit-taking behavior intensified. When the 365-day return reaches those levels, investors often face a pivotal decision: cash out gains or hold for further upside.
“Once this threshold level is reached, investors will either choose to take profits or wait for the rise to continue,” Adler stated.
This behavioral pattern has been consistent since September 2023, suggesting that market psychology remains cyclical and predictable to some extent. The current 30% growth indicates that we may still be in the middle stages of a broader upward trend—well before the peak sentiment typically seen at cycle tops.
What Does This Mean for Investors?
For investors trying to time their entries or exits, Adler’s analysis offers valuable context:
- Short-term traders can use the Realized Supply ratio as a mean-reversion signal. When the ratio spikes well above average, it may be a sign to tighten stop-losses or secure partial profits.
- Long-term holders (HODLers) might view the current neutral valuation as confirmation that Bitcoin remains in a healthy accumulation phase, especially with macro tailwinds like institutional adoption and regulatory clarity improving.
- New investors entering the market should avoid FOMO-driven decisions. With Bitcoin not yet in overbought territory, there may still be room for upside—but patience and risk management are essential.
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Frequently Asked Questions (FAQ)
Q: What is Realized Supply, and why does it matter?
A: Realized Supply is an on-chain metric that calculates the total value of all Bitcoins based on their last movement price. It matters because it reflects the actual cost basis of active holders, helping determine whether Bitcoin is trading at a premium or discount to its intrinsic investor value.
Q: How is the Realized Supply ratio similar to the P/E ratio?
A: Just as the P/E ratio compares a stock’s price to its earnings, the Realized Supply ratio compares Bitcoin’s current price to the average price investors paid. A high ratio suggests overvaluation; a low one suggests undervaluation.
Q: What does a 30% 365-day price change mean for Bitcoin?
A: A 30% annual gain indicates strong momentum but is still below peak levels seen in past bull markets (60–70%). This suggests Bitcoin may still have room to grow before widespread profit-taking occurs.
Q: Is Bitcoin currently in a bubble?
A: Based on Adler’s analysis, no. With both the Realized Supply ratio and 365-day return in moderate ranges, Bitcoin appears to be in a balanced phase—not showing signs of extreme speculation or irrational exuberance.
Q: Should I sell Bitcoin now?
A: This depends on your investment goals and risk tolerance. The data suggests we’re not at a cycle top yet, but monitoring these metrics can help identify when profit-taking pressure may increase.
Q: Can on-chain data predict future price movements?
A: While not foolproof, on-chain metrics like Realized Supply and holding patterns provide valuable insights into investor behavior and market structure. They’re best used alongside technical and macroeconomic analysis.
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Bitcoin’s current position—slightly above its annual average valuation but far from overheated—suggests a market maturing with increasing sophistication. Analysts like Axel Adler are helping bridge the gap between raw price action and deeper financial understanding through tools like Realized Supply and long-term momentum indicators.
While past performance doesn’t guarantee future results, historical patterns offer guidance. The current 30% annual return and neutral Realized Supply ratio hint that we may still be in the middle innings of a broader bullish trend.
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As always, investors should conduct their own research and avoid making decisions based solely on any single metric. But with clearer signals emerging from on-chain analytics, the path forward for Bitcoin looks less speculative—and more strategic—than ever before.