Bitcoin has recently gathered some strength to push the price out of the resistance area. At the time of writing, BTC is trading around the $36,000 mark after climbing to the mid-$38,000 region yesterday. The king coin has taken a massive hit, falling almost 45% from the ATH of $69,000 hit last year, and BTC indicators are still signaling a downtrend.
The Fear and Greed Index is at 20 at the time of writing, indicating an “extreme fear” mentality. According to a poll by popular analyst/trader Rekt Capital on Twitter, over 53% believe Bitcoin is in a bear market.
https://twitter.com/rektcapital/status/1484922697003978761?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener
Glassnode, a leading on-chain metrics analysis platform, highlighted this potential downside at Messages Her latest The Week On-Chain.
“Bitcoin bulls are in jeopardy as the price has halved since November ATH. In our latest analysis, we look to determine whether Bitcoin has entered an extended bear cycle based on investor sentiment, behavior and network profitability.
They shape the “ongoing protracted bear market” by “taking advantage of investor behavior and past return patterns.” One thing is for sure, the recent crash was severe and “such a sharp drop has the potential to change investor perceptions and sentiment at a macro level.”
According to Glassnode, the aforementioned crash is “the second worst sell-off since the 2018-2020 bear market, second only to the July 2021 plunge when the market fell -54% from the highs reported in April.”
https://twitter.com/glassnode/status/1485384400141533192?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow noopener
“Bitcoin is down ~50% against ATH belong November, making this the second-biggest drop in the cycle halving This. Adjustments in 2017 and early 2021 are much smaller at 20% to 40%, while July 2021 is down 54%.”
In addition to the price, investors gave up “more than $2.5 billion in net worth” on-chain this week, and the majority of them were “short-term holders.”
This lowest network return (since July 2021) shows that we are only in the early stages of a bear market.
Net unrealized gain/loss (NUPL) | The source: glass node
This is in stark contrast to the higher yield values of ~0.75 in March and ~0.68 in October last year. Although there is still a gap, the above data has at least started an optimistic path (yellow).
“Considering previous cycles, profitability this low is typical of the early to mid-stages of a bear market (orange). Based on this observation, it can also be reasonably argued that a bear market began in May 2021.”
At the time of writing, the MVRV Z-Score is 1,004. According to Glassnode, the indicator is in a range that often occurs during bear markets. Similar to the NUPL indicator above, a bearish divergence was forming.
MVRV Z Score | The source: glass node
According to Glassnode:
“The bulls have to be aggressively bullish or the bears will be favored. Therefore, even a short-term upswing is possible if history repeats itself.”
Actual Price-to-Preferred Ratio (RTLR) | The source: glass node
In the chart above, the market is trading below the RTLR price of $39,200 but above the real price of $24,200. This is commonly seen in early to mid bear markets.
The bitcoin market has seen many heavy losses lately. This is proven by the net profit/loss ratio.
“More than $2.5 billion in net losses were realized as the market slipped to weekly lows on Saturday as investors shed coins. This is the largest capitulation of this decline and roughly coincides with a net loss of $2.61 billion in May 2021.”
Real Net Profit/Loss (NRPL) | The source: glass node
Long-term (LTH) holders, on the other hand, are unlikely to be shaken by this sharp drop. All in all, the Bitcoin cycle is probably dead. Or maybe we are in a bear market as Glassnode metrics suggest. In any case, it’s clear that LTH isn’t selling, and that could lead to positive action going forward.
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