Is Cryptocurrency in a Bear Market? Glassnode analyzes latest bitcoin crash
Glassnode believes cryptocurrencies are in a bear market. In Messages In the latest The Week On-Chain, the company attempts to “determine the possibility of an ongoing bear market” using “historical investor behavior and profitability patterns as a guide.” One thing is for sure, the recent crash was very serious and “such a drastic drop has the potential to shift investor perceptions and sentiment at a macro level.”
According to Glassnode, “This is currently the second-worst selloff since the 2018-2020 Cryptocurrency in a Bear Market, following the -54% drop in July 2021 from the highs reached in April.”
In addition to the price, investors “sold over $2.5 billion in net worth on-chain this week.” And who are you? “The market share of that goes to short-term holders.”
Bear market indicators
The first indicator Glassnode lists is the Native Unrealized Profit/Loss (NUPL) Indicator, which measures “the overall profitability of the market as a percentage of capitalization.” How does Bitcoin fare in this regard?
“NUPL is currently trading at 0.325, indicating that the equivalent of 32.5% of Bitcoin market cap counts as unrealized gain.”
BTC price falls from ATH | The source: glass node
“Considering previous cycles, profitability this low is typical of the early to mid bear market (orange). Based on this observation, it can also be reasonably argued that a bear market began in May 2021.”
However, this is not enough.
The second indicator is the “MVRV Ratio”. This value “is calculated by dividing market capitalization by net capitalization and is a useful tool in identifying periods of high and low returns for investors.”
“With the MVRV-Z Index currently at 0.85, the market is in bear market territory and is now showing bearish divergence similar to the NUPL Index above.”
As if that wasn’t enough, Glassnode continued to play the trump card.
The third indicator is the “Real Price to Preferred Ratio (RTLR)” which is calculated by “dividing the real price by the preference”.
“The market is currently trading below the RTLR price of $39,200 but above the real price of $24,200. Again, this is often seen during the early to mid-bear market.”
Who sold and who is still holding?
Not surprisingly, the Short-Term Holder (STH) is selling. Glassnode determines STH based on their coin age.
“Coins are considered STH property if they are less than ~155 days old and more likely to be spent given statistical volatility.”
It should be noted that STH coins are “currently at a loss”. In fact, “as of this week, almost the entire supply of STH has been lost.” This can be intimidating for newbies, so these coins risk being sold at a loss. However, there will come a time when they will regret making that emotional decision.
BTC price 4 hour chart | Source: TradingView
The remaining question here is who is holding strong? According to Glassnode, “Interestingly, the supply of STH remains near multi-year lows, showing that long-term holders (LTH) are impressively ahead of this massive decline.” Of course, those who understood the game were not easily swayed.
“Over 59.3% of circulating supply has been idle for more than a year, up from 5.8% over the past 3 months.”
That sounds optimistic, but Glassnode still found a way to demonstrate a bear market:
“While a large percentage of long-held coins is increasing and is generally viewed as constructive, it still bears similarities to a bear market, a time when only HODLers and accumulators remained. patient.”
According to Glassnode, many people think that “the bear market will start in May 2021”. But is it like a bear market? The answer is no, and it doesn’t look like a bull market either. Perhaps we are in a new phase. The Bitcoin cycle is likely dead. Or even if a bear market occurs, as Glassnode has tried to demonstrate, LTH has no intention of selling.
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