With the recent cryptocurrency market downturn, some investors are worried that Bitcoin and Ethereum may not survive. The current bear market has been long and deep, with valuations being hit severely and rapidly. With the present’s lengthy duration and vast size of capital destruction, it’s entirely possible that 2022 will go down in history as the most significant bitcoin bear market ever recorded in digital asset history.
Bear market hits crypto the worst for 6 months in a row
The current crypto bear market is the worst ever due to numerous conditions in decentralized and centralized markets. According to Glassnode, most crypto traders are underwater and continue to sell for a loss. The present bear market has been extremely harmful to investors, with some even referring to it as the “coldest cryptocurrency winter.”
Glassnode, a blockchain analysis firm, released a lengthy report earlier this week called “A Bear of Historic Proportions.” The study explains how Bitcoin’s present decline below the 200-day moving average (MA), a negative departure from realized price, and net realized losses have combined to make 2022 the worst year in Bitcoin’s history:
In the midst of this, Bitcoin and Ethereum have both traded below their previous cycle ATHs which is a first in history. This has subsequently plunged a great proportion of the market into unrealized loss, with all 2021-22 investors now underwater. As this financial pain sets in, a growing proportion of investors are liquidating their holdings, locking in record realized losses.
Glassnode
The first and most obvious sign of a bear market is when the spot price of Bitcoin (BTC) falls below the 200-day MA, with an even more severe scenario falling below the 200-week MA. To emphasize how unusual these present price levels are, Glassnode demonstrated that during the 2022 bear market, Bitcoin fell below half of the 200-day MA levels.
The scale and duration of the present Bitcoin downturn are compared to those from previous bear markets in this study. The analysis discovered that bear market lows had been established with BTC drawdowns of -75 percent to -84 percent from the ATH, with durations ranging from 260 to 410 days in 2015 and 2019-20, respectively.
According to Glassnode, falling below 0.5, the Mayer Multiple (MM) is an infrequent occurrence that hasn’t occurred since 2015. The MM incorporates price changes above and below the 200-day MA to indicate overbought or oversold situations. According to the report, only 84 of the 4160 trading days (2 percent) have a closing MM value below 0.5:
For the first time in history, the 2021-22 cycle has recorded a lower MM value (0.487) than the previous cycle’s low (0.511). Only 84 out of 4160 trading days (2%) have recorded a closing MM value below 0.5.
Glassnode
The analysis also confirmed that the spot price has fallen below the realized price, further emphasizing the severity of current market conditions. The decline has compelled investors and traders to sell assets at a loss in order to preserve their positions. Glassnode commented on the cascade effect, stating that it’s typical of bear markets and market capitulations.
The current crypto market situation
According to CoinMarketCap, the current live Bitcoin rate is $21,451.44, with a trading volume of $20,965,630,024 in 24 hours. In the past 24 hours, Bitcoin has risen 0.12%. The current Ethereum price is 1,230.78 USD per ETH with a 24-hour volume of 13,264,972,878 USD. In the last 24 hours, ethereum has dropped 1.05 percent. Finally, the global crypto market cap was $962.95 billion over the previous day, a decrease of 0.16%.
The Glassnode crypto bear market report is crucial for the cryptocurrency sector. According to Glassnode, instances when spot prices trade below the actual price, are unusual. The study also said that this is only the third time this has occurred in the previous six years and the fifth time it’s happened since Bitcoin’s creation in 2009:
The infrequency of this occurrence is reflected by Glassnode’s data, demonstrating that just 13.9% of all Bitcoin trading days have spot prices falling below realized prices.
The SEC’s stringent stance on crypto has created a crisis for investors in the sector. Some of these problems are exacerbated by big traders locking in their losses on Bitcoin, the world’s largest cryptocurrency by market capitalization. When Bitcoin fell below $20,000 in June 2022, Glassnode wrote that investors had “laid claim to the enormous daily USD denominated realized loss in history.
Glassnode concludes that the crypto market is in the midst of a capitulation event and bear market, including all of the negative numbers. According to media reports, miners have begun selling their stacks. The sell-off is another sign that a capitulation has occurred, and the crypto bear market is at its extremes. Such events are frequently signs of a cycle’s bottom price range.
