Investors who have experienced the crypto winter and seen the collapse of many investment funds and protocols over the past few weeks are asking the question: “When will it all end?”
Bitcoin (BTC), once again, is testing resistance at its 200 week moving average. The real question is whether the price can push higher in face of multiple headwinds, or if it will trend back down into the range that it has been stuck in since June.
Glassnode’s most recent newsletter states that “duration” is what separates the current bear market from previous cycles. Many on-chain metrics can now be compared to historical drawdowns, according to Glassnode.
Realized price has been proven reliable in identifying bear market bottoms. It is the total value of all Bitcoin divided by the number currently in circulation.
The number of days that Bitcoin prices traded below their realized prices. Source: Glassnode
The chart shows that Bitcoin traded below its realized value for a long time during bear markets, except for the March 2020 flash crash.
“The average time it takes to get below the Realized price is 197 days, compared with the current market which has only 35 days on the clock.”
This would indicate that current calls for an end to the crypto winter are premature as historical data shows that there is still a lot of price movement in the market before the next major uptrend.
Is the bottom closer to $14,000 than it appears?
Glassnode highlighted two models that are “on-chain pricing models” that tend to attract spot prices in late stage bears when it comes to trading.
Bitcoin balances, delta prices and Bitcoin realized Source: Glassnode
The chart shows that the previous major bear markets lows were established after a “short term wick down to Delta price,” which is highlighted green. A similar move today would indicate a BTC close to $14,215.
These bearish periods saw the BTC price trade within an accumulation range “between Balanced Price (range low), and Realized Price (range hi),” which is currently where it is.
A major capitulation event, which exhausts all remaining sellers, is one of the most obvious signs that a bearish market is ending.
Although some remain unsure whether this is true, Glassnode pointed out that there was on-chain activity in June’s plunge to $17.600, which could be a sign that capitulation occurred.
Bitcoin total supply in loss Source: Glassnode
BTC was trading at $17,600. At that time, 9.216 million BTC had an unrealized loss. This volume dropped to 7.68 million BTC after the June 18 capitullation.
This means that 1.539M BTC have been last traded (have a cost basis) between $17.6k to $21.2k. This means that approximately 8% of the circulating supply was changed in this price range.
Another sign of capitulation was the “staggering quantity of BTC”, which locked in a realized loss of May through July.
Bitcoin 30-day sum realized losses. Source: Glassnode
Terra’s collapse resulted in a $27.77 Billion realized loss. The June 18 plunge below 2017 cycle high resulted a $35.5 Billion realized loss.
Related: Sub-$22K Bitcoin is more attractive than gold’s market capitalization
Is this the end for the bear market?
The Adjusted Spent Profit Ratio (aSPOR) is another indicator that capitulation may have already taken place. It compares outputs’ value at the time they are used to their original creation.
Bitcoin adjusted SPOR. Source: Glassnode
Glassnode states that when profitability falls (as shown by the blue Arrows), investors are likely to suffer large losses. This eventually leads to “a final waterfall moment in capitulation,” which is highlighted red.
“Eventually, the market reaches seller exhaustion. Prices start to recover and investor pain begins to subside.”
Glassnode stated that in order to confirm that capitulation took place and that accumulation is ongoing, the aSOPR value should ideally recover above 1.0.
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Eileen Wilson –Technology and Energy
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