Estimated cost basis across cryptoassets

When Bitcoin rocketed to almost $20,000 in 2017 it became front page news. Since then people have not let Bitcoin enthusiasts forget following Bitcoin’s dramatic 80% crash to $3,126. However, despite the hype, not much Bitcoin actually traded near $20,000. Nor has much traded above even half of that. In fact, the estimated cost basis for the Bitcoin network is just under $6,000.

What is estimated cost basis?

Cost basis refers to the original price that an asset was acquired. It can be used for anything from calculating taxes owed on capital gains, to assessing the likelihood a company’s shareholders will accept an acquisition offer. Using cost basis we can gain interesting insights into the investor behavior of various cryptoassets. On-chain data provides near unprecedented insight into the matter.

Estimated cost basis is calculated by dividing a cryptoassets realized capitalization by its current supply. The metric is meant to present realized capitalization in the more familiar, “per coin” price format, that observers can easily use to determine at what price does a cryptoasset, in aggregate, break-even.

Realized capitalization was introduced by CoinMetrics in 2018, and is calculated by valuing each unit of a cryptoassets supply at the price it last moved on-chain. So if a bitcoin last moved when the price of Bitcoin was $7,000 then that bitcoin would be valued at $7,000 instead of its current price of $9,500. Realized capitalization is the sum total of all these calculations.

As opposed to market capitalization, which simply multiplies each unit by a cryptoassets current price, realized capitalization attempts to de-emphasize lost, unclaimed, or otherwise inert coins. This is done to eliminate the potential distortion in a cryptoassets market cap, that stems from valuing all coins unconditionally and uniformly.