The record price drawdown since July 2021, significant realized losses by short-term investors, and the steadfastness of hodlers all point to a bearish trend for bitcoin. Such conclusions were reached in Glassnode.
#Bitcoin bulls have been put firmly on the back-foot, with prices cut in half since the Nov ATH.
In our latest analysis we seek to define whether #Bitcoin has entered a prolonged bear, using investor psychology, behaviour, and network profitability.https://t.co/4N1FKeHZHM
— glassnode (@glassnode) January 24, 2022
At the time of writing, the rollback of Bitcoin quotes from ATH almost reached 50%. After the 2018-2020 bear market, the current decline is the second deepest after July 2021, when the figure was 54%.
For comparison, corrections within the bullish cycles of 2017 and 2020-2021 did not exceed 20-40%. Analysts admitted that such a disposition could change investors’ perception of the current market situation at the macro level.
Data: Glassnode.
The continuation of the downward dynamics was facilitated by the capitulation of investors. Last week, Net Realized Profit/Loss was $2.5 billion. In other words, the market was dominated by liquidation of positions with losses relative to the prices of previous on-chain operations.
The lion’s share of this amount came from short-term investors who made their last transactions more than 155 days ago.
Data: Glassnode.
The Spent Exit Profit Ratio (Short Term Holder SOPR) in relation to short-term investors collapsed after testing resistance at around 1. Such dynamics speaks of the desire of this group of players “to get their money back at any price”. Lower values indicate an increase in their relative losses.
Data: Glassnode.
According to experts, short-term holders account for 18.3% of the total supply of BTC (excluding coins held on the exchange). Almost all of them are “unprofitable” for the owners.
“It creates a psychological barrier that further increases the chances of a sale”, analysts stressed.
Data: Glassnode.
The relative share of coins owned by short-term investors is close to multi-year lows. The correction did not affect the hodlers – they increased their share in the total supply to 81.7%, despite the fact that 6.04% of their BTC became unprofitable.
Data: Glassnode.
The “age” analysis showed that 59.3% of BTC last moved on the network over a year ago. These are coins that investors purchased in the early part of the bull cycle (between October 2020 and January 2021) or before. Over the past three months, the indicator has grown by 5.8%. Experts recalled that such behavior is typical for bear markets.
Data: Glassnode.
Analysts also looked at the difference between unrealized profits and losses based on the last movement of coins (Net Unrealized Profit/Loss, NUPL). It was 0.325, which means that about 32.5% of the coins are with unrealized profit. This contrasts with March’s reading of 0.75 or 0.68 last October.
“Given previous cycles, these low returns are typical of the early to mid phase of a bear market (highlighted in orange). In contrast to the bull markets of 2013 and 2017, NUPL fell between the tops of March-April and October-November. The reason is the distribution of coins at the highs. This led to an increase in the overall market value and a bearish divergence.”, experts concluded.
Data: Glassnode.
Recall that UBS analysts warned of the risks of an “apocalyptic crypto winter”.
Earlier, the investment company Invesco allowed bitcoin to fall below $30,000 in 2022, as the “bubble in the asset is deflating.”
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