Bitcoin, the largest cryptocurrency recently gathered some strength to push outside the resistance area. At press time, BTC is up over 4% to hit the $37.7k mark. This sounds fine, however, the king coin suffered a huge shock from its previous ATH, $64k last year. The indicators are still signaling a downtrend regarding BTC.
Fear and Greed Index, at time of writing stand at the age of 23, signal ‘Extreme fear’. According to popular crypto analyst/trader, Rekt Capital poll on Twitter, more than 50% support said story.
To be #BTC Still in a Bull Market or a New Bear Market?$BTC #Crypto #Bitcoin
– Rekt Capital (@rektcapital) January 22, 2022
There’s more
#Bitcoin The bulls have been firmly placed on foot again, with prices halving since November ATH.
In our latest analysis, we seek to determine whether #Bitcoin entered a prolonged bear cycle, using investor sentiment, behavior and network profitability.https://t.co/4N1FKeHZHM
– glassnode (@glassnode) January 24, 2022
Glassnode, a leading on-chain metrics analytics platform released their latest “The Week On-Chain” newsletter to highlight this possible bearish trend.
It establishes “the possibility of a prolonged bear market in progress” by “using historical investor behavior and profitability patterns” as a guide. One thing is for sure, the recent crash was severe, and “such a dramatic drop has the potential to change investor perceptions and sentiment at a macro scale,” the report added.
How serious is it?
According to Glassnode, the aforementioned crash was “the second worst sell-off since the 2018-20 bear market, only to be overshadowed by July 2021, where the market is down -54% from the highs set.” in April”.
#Bitcoin down ~50% from November ATH, making this the second-deepest drop in this halving cycle.
Adjustments in 2017 and early 2021 are much shallower by 20% to 40%, while July 2021 is down -54%.
Live chart: https://t.co/bglPBJAD7J pic.twitter.com/tB9U5ihpL5
– glassnode (@glassnode) January 23, 2022
In addition to price, investors “invested more than $2.5 billion in net real value” on-chain this week. Who are those hand paper investors? Well, the majority of these losses are attributed to ‘Short Holders.’
Here are some stats
Bitcoin’s NUPL is currently at 0.361, which indicates that the equivalent of 36.17% of Bitcoin’s market cap is considered unrealized gains. Lowest network returns (since July 2021) alludes to a ‘bearish’ period.
This is in stark contrast to the much higher profit values of ~0.75 booked in March and ~0.68 booked last October. While the divergence is maintained, the aforementioned metric has at least begun an upbeat path (in yellow).
How does this indicate a bear market?
“Considering previous cycles, such low profitability is typical during the early to mid bear market (orange). One could also reasonably argue that a bear market begins in May 2021 based on this observation.”
At the time of writing, the MVRV Z-Score stands at 1,004. According to Glassnode, the market is in range to be accessed at bear markets. The bearish divergence is visualized similarly to the NUPL indicator above.
Source: Glassnode | MVRV Z-Score
According to Glassnode,
“The bulls either need to rise aggressively, or else the odds are going to be in favor of the bears. That said, a short-term rally is also possible if history acts as a guide. “
Source: Glassnode | RTLR
In the chart above, the market is trading below the RTLR price of $39.2k, but above the actual price of $24.2k. Again, this is often observed during early to mid-stage bear markets.
Dumping session
No surprises here. The Bitcoin market has seen heavy losses. The Net Realized Profit/Loss Index proves this.
“As the market traded to a weekly low on Saturday, a net loss of more than $2.5 billion was realized, with investors spending coins at a loss. This marks the largest investment event of this draw and roughly matches the $2.61 Billion net loss from May 2021.”
The chart below highlights similar concerns.
Source: Glassnode | NRPL
Needless to say, Long Term Holders (LTH) do not seem to be fazed by such a drastic drop. All in all, the Bitcoin cycle is probably dead. Or maybe we’re in a bear market as the Glassnode metrics seem to suggest. Either way, it’s clear that LTH is not for sale and that could yield positive action in the future.