What "realized" means here
Every bitcoin in circulation was last moved on-chain at some price. Realized cap sums up every coin's value at the moment it last transacted, rather than at today's spot price — a coin dormant since 2011 is still valued at its 2011 price in this calculation, until it moves again. Divide that total by circulating supply and you get realized price: the network's aggregate average cost basis, expressed as a single per-coin dollar figure.
This is different from a simple moving average of price. A moving average only looks at how price has moved over a fixed window of time. Realized price looks at where the actual coins are sitting cost-basis-wise, weighted by how much supply last moved at each price level — it can stay flat for long stretches if very little supply moves, then shift quickly if a large old cohort of coins finally transacts.
Why it behaves like a floor
When spot price sits above realized price, the average holder (in aggregate) is sitting on an unrealized gain. When spot price falls below realized price, the average holder is underwater. Historically, this second condition has been rare, brief, and associated with capitulation-phase bear markets — it happened at the 2015, 2018, and 2022 cycle lows. Each time, it didn't last more than a few months before price recovered back above it.
Why that's a description, not a guarantee
The fact that price has always recovered above realized price so far is a track record of three or four episodes — not a law of markets. Realized price is a backward-looking aggregate: it reflects where the supply that already exists was last transacted, and says nothing mechanical about future demand. A large enough wave of new selling at any price level would move it, just like it always has.