It’s been three months since Bitcoin price hit its all-time high, just under $ 65,000. For the past two months, Bitcoin (BTC) has traded in the $ 30,000 to $ 40,000 range, 54% below its high.

The downturn comes at a time when many analysts are predicting the exact opposite – a bull cycle that will hit new record highs within months – and some are even speculating that the six-digit BTC price will hit this year.

So what’s going on right now? Is the current market downturn just a slip on an uptrend, or is the crypto market returning to long-term bearish territory last seen in 2018?

Bullish indicators

Bitcoin’s historical price activity correlates attractively with its halving cycles, with previous all-time highs between 12 and 18 months after the halving. PlanB, the creator of the stock-to-flow BTC pricing model, is one of the strongest proponents of it. On Twitter, the analyst rest insists that the stock-to-flow cross (S2FX) asset pattern predicts further upside moves and indicates similar temporary downturns preceded by epic rallies in previous cycles.

The S2FX model is by far one of the most accurate Bitcoin price predictions over the years. Additionally, the on-chain metrics seem to support the theory that the bearish sentiment might be short-lived. For example, shortly after Bitcoin peaked in April, traders suddenly started moving funds on exchanges, ending the nearly uninterrupted eight-month streak of HODLing.

Igneus Terrenus, communications chief at the Bybit cryptocurrency exchange, believes short-term traders are responsible for the sell-off after the rise in BTC prices. He told Cointelegraph:

“A series of write-offs has rocked many short-term speculators who have made up most of the losses in recent months. While the euphoria has subsided at the beginning of the year, whales and long-term owners remain optimistic despite the overall decline in market sentiment. “

In the last few weeks, however, there were again cash outflows on the trading platforms. Glassnode’s actual HODL ratio, which represents investor willingness to abandon stocks, also reflects similar patterns in previous cycles.

Richard Nie, senior research analyst at Bingbon, believes the forex flows speak for themselves. Speaking to Cointelegraph, he agreed that the indicators are showing a bullish shift. “We should pay attention to the number of whale keepers and the amount of BTC held by exchanges,” he said, adding that “more and more BTC is being withdrawn from exchanges and moved to other exchanges.” Private address, that’s one strong bullish signal. “

Mati Greenspan, founder and CEO of Quantum Economics, told Cointelegraph: “Currently, crypto volumes on the exchanges are at their lowest level for the whole year. Once trading recovers, it is a good sign that the slack is over. “

Broader bullish indicators

Project funding is another key indicator of market sentiment, and 2021 is an outstanding year for crypto startups. As Cointelegraph reported, the crypto industry saw more funds in the first quarter of 2021 than in all of 2020 combined, raking in $ 2.6 billion.

The downturn since April does not seem to have ruined venture capitalists’ appetites. In late May, stablecoin issuer Circle raised $ 440 million, and just days later, Mike Novogratz’s crypto asset team announced it was launching a crypto mutual fund worth $ 440 million and $ 100 million, respectively .

In mid-June, Bloomberg reported that the total amount of venture capital investments in crypto for the year had reached over $ 17 billion. Even with the $ 10 billion discount Block.one invested in its new exchange venture, that would be enough to prove that the crypto market’s performance in the second quarter is not yet weighing on crypto market growth.

There are also macroeconomic factors that need to be considered. Amid the ongoing uncertainty about the state of the world economy, a number of people, including Robert Kiyosaki, author of Rich father, poor father – predicted a stock market crash. In the case of Kiyosaki, he also encourages his followers to hoard gold and bitcoin. There are signs that Bitcoin is becoming more correlated to stocks, but could the mass sell-off in stocks lead investors to turn to BTC as a safe haven at some point?

Another consideration is that Bitcoin’s upcoming Taproot upgrade will be activated in November. It’s the first upgrade to the Bitcoin network since the Segregated Witness (SegWit) fork, which took place in August of this year 2017 through an epic upgrade to a new all-time high of $ 20,000 in December 2017. Whether history changes in that regard It is difficult to say, there is even a direct link between upgrade and market, but it is worth remembering.

Bear in the form of regulation

There is no doubt that regulation is the biggest declining force that has shaped the market in recent months. In particular, the Chinese government’s crackdown on mining has sparked widespread unrest. Many large mining operations have been forced to go offline – some permanently and some temporarily, as they are moving from China to new locations. This move certainly came at a significant cost, and meanwhile, Bitcoin’s mining difficulty has dropped the most in history, which only confirms the impact the grip had on the net.

However, legislators from other countries have recently started to take a closer look at cryptocurrencies. India, which only eased its stance on cryptocurrencies in 2020, may consider a ban again, although the situation continues to develop.

The UK’s financial regulator recently launched a campaign against Binance asking it to stop conducting regulated business in the country. Now crypto companies are withdrawing their UK license applications while users from their banks are banned from exchanges.

All in all, Binance has come under regulatory pressure from around the world for a variety of reasons. In the meantime, it remains unclear whether regulators will specifically monitor Binance or whether the exchange is simply viewed as representative of the rest of the crypto industry.

Connected: Binance Cross-Market: Do regulators watch out for cryptocurrencies?

Institutional analysts have also made ominous predictions for Bitcoin price, with JPMorgan issuing a warning that the short-term lineup for BTC continues to look volatile. While these developments are unlikely to be as seismic as China’s mining ban, they haven’t instilled confidence in the market.

Believing there are reasons to be careful, Daniele Bernardi, CEO of Fintech regulator Diaman Group, told Cointelegraph:

“If we analyze the Bitcoin price based on the S2F model, the Bitcoin price is likely to triple in the short term. At Diaman, however, we have also developed a model based on acceptance rates. On this model, $ 64,000 ATH is fair. “

A stronger bullish fall?

Since it has already been hinted that most of the signals pointing to this bull market are only halfway there, is there enough evidence to reverse that direction? All in all, and unsurprisingly, it is too early to be definitive. On the one hand, there is regulatory turmoil and significant reduce in terms of trading volume, indicating a general lack of interest and engagement. On the flip side, there are a number of indicators and online indicators of investor sentiment that seem to be piling up for a bull market continuation.

Related: GBTC Unlocks Closer As The Impact On Bitcoin Price Is Still Unclear

In reality, however, regulatory issues continue to confuse the market, showing that pricing patterns and VC funding may not necessarily allay concerns. If there are more major pullbacks, the bull market may not be able to recover.

The fact that the price has stayed above $ 30,000 so far, despite perhaps the greatest mining safety test in history, is evidence of the bullish forces at play. If the current regulatory situation begins to calm down, there is every possibility that the bullish part of the market cycle could continue with its forecasted end.