Cryptocurrencies (virtual currencies) are in a bear market.
It should not be taken lightly. Analysts have already applied uniform indicators (a 20% drop in market benchmarks) twice this year to prematurely judge the bear market.
In the world of crypto assets, Bitcoin (BTC) has become the benchmark for the entire market. Bitcoin’s dominance (the share of all crypto assets in market capitalization) has fallen to mid-40%, but nonetheless there is no comparable in the stock market.
If Apple, which is at the top of the S & P 500 Index with a market capitalization of $ 2.2 trillion, accounts for a large proportion of the S & P 500’s total market capitalization at the same level as Bitcoin’s dominance, its market capitalization would be $ 17 trillion. Due to Bitcoin dominance, the returns of all crypto assets usually have a strong correlation with Bitcoin.
For Bitcoin, a 20% drop is common on the way to a new record high. This quarter, an easy way to determine if such a drop (rise) was a precursor to a new market was identified. The standard is that the CoinDesk Bitcoin Price Index (XBX) changes by 20% and then Bitcoin does not return to its previous high (or low) for 90 days.
The graph above uses this method to track the bull and bear markets of Bitcoin. XBX reached a record high of $ 64,888.99 on April 14 (Coordinated Universal Time). By April 22nd, the price had dropped by more than 20% to $ 50,500 (since it had dropped to $ 28,825.76), as of June 27th, there were 24 days left until the 90th day of the reference point was reached. Has been done.
Predicting that Bitcoin will not recover to $ 65,000 in the next three weeks doesn’t seem particularly bold. But this is about Bitcoin. At the time of this writing, XBX was $ 33,493.55. If it were to recover to an all-time high, it would be a 93.7% increase. Since the introduction of XBX in April 2014, Bitcoin has seen its level rise 25 times in 24 days.
Explain why you think July will not be the 26th. However, I also think the bear market will be short-term.
Alternative options in the spot market
Two alternative options are currently relieving buying pressure in the spot market.
1. Cheap GBTC
The largest Bitcoin fund, the Grayscale Bitcoin Trust (GBTC), has been trading cheaper than the actual Bitcoin price since February. This situation is unlikely to change, as most of the trusts will expire in July.
GBTC is not redeemable, but some investors who buy Bitcoin in the spot market are likely to take advantage of this cheap investment trust. (Grayscale is owned by CoinDesk’s parent company, Digital Currency Group, and GBTC is based on XBX)
2. ASIC oversupply
The Chinese government’s crackdown on Bitcoin mining does not seem to end with a press release alone. Miners have shut down across China and are flooded with unused mining equipment.
Bitcoin mining isn’t for the weak or underfunded, but it gives investors the opportunity to get Bitcoin at a lower price than the spot market price.
It is unclear whether mining equipment that has become obsolete in China can operate in North America and other areas that are becoming mining centers. However, some of the larger investors who were supposed to buy and hold are undoubtedly looking at the increasingly attractive capital spending outlook for the alternative option of mining and holding.
Market without leader
There is evidence that April was a private investor-led price increase. The trading volume of altcoin, including meme coins such as Dogecoin (DOGE), exceeded the trading volume of Bitcoin in the spot market. But now, buying by individual investors is showing signs of exhaustion.
On the other hand, even if you look at the barometer of the participation of fixed-term investors, such as the trading volume on LMAX Digital and the open interest of Bitcoin futures on the Chicago Mercantile Exchange (CME), individual investors are buying There are no signs that term investors are in a hurry to replace.
These indicators can lead to false conclusions, but what you can quickly understand is that no one is currently in control. Network data confirms this, with active addresses declining in both Bitcoin and Ethereum.
What “fundamentals” indicate
The blank period of absence of leaders in the market may indicate a short-term bear market sandwiched between bull markets. There is also network data that supports this analysis.
Since Bitcoin does not symbolize cash flow rights, there is no true “fundamentals” in Bitcoin. However, Bitcoin and other crypto assets have a set of indicators of activity on the network. I’m not as sweet as applying Metcalfe’s Law (predicting effect, not value) to Bitcoin prices, but network data certainly provides another layer of insight, especially when combined with market data. That’s it.
The glass above, announced by Glassnode last week, shows that more and more of the Bitcoins that moved during the recent plunge are “young coins,” the last coins to move in the last six months. Shown.
Short-term investors are selling, and long-term Hodler remains the same. As Hodler’s uncertain profits have reached the levels seen before the significant drop in Bitcoin’s past, as pointed out by Lucas Nuzzi of Coin Metrics. Absent.