On-chain analysis has revealed many similarities with the 2022 Bitcoin bear market and previous cycle bottoms.
In its ‘week on-chain’ report on Oct. 31, analytics provider Glassnode made a number of comparisons between the current Bitcoin market cycle bottom and those from previous bear markets.
Last week’s relief rally appears to have fizzled out with a double-top rejection, as reported by CryptoPotato yesterday. Glassnode stated that the market was “hammering out a Bitcoin bottom, with almost textbook resemblance to prior cycle lows.”
It reported that, as in previous cycles, the Bitcoin bear market has inflicted severe financial loss on investors and hodlers. The last thing that remains is a component of time and investor apathy, it added.
#Bitcoin has rallied back above the key $20k psychological level after many months of low volatility.— glassnode (@glassnode) October 31, 2022
In this edition, we analyze how Bitcoin may be hammering out a near-textbook bear market floor and what risks may lay on the road ahead.
Read it here 👇https://t.co/WrsifLhxHC
Hammering Out a Bottom
Glassnode used a number of metrics, such as Realized Price and Mayer Multiples, to determine cycle lows and a bottom discovery phase.
Realized price, or the average acquisition price per coin for the wider market, is currently at $21,105, according to Woo Charts. When spot prices trade below the realized price, “the aggregate market can be considered to be in unrealized loss,” noted Glassnode. This has been the case for the best part of the past four months.
The Mayer Multiple, which is the ratio between the price and the 200-day simple moving average (SMA), helps to identify oversold or bought conditions. Values below 0.6, where it currently is, signify cyclical oversold markets.
These conditions played out in both the 2014-15 bear market and that of 2018-19 though not for as long as the current duration. The upper and lower bounds of this sideways channel tend to be around the realized price to the balanced price, with the market value somewhere in between.
It noted that this condition of “financial stress” continues into the Bitcoin bull market transition, so there could be a lot longer to go in this bear cycle.
“This condition of acute financial stress has been in play for 3.5 months so far, which is shorter than similar intervals in previous bear markets.”
Glassnode concluded that markets had yet to see an influx of new demand or a transition to bullish conditions, but “there does appear to be seeds planted in the ground.”
A slight shift in the monthly MACD indicator could also allude to a longer-term change.
And there you have it ladies and gentlemen, a momentum [and momentous] shift on the monthly MACD.— dave the wave🌊🐫 (@davthewave) November 1, 2022
No guarantee of certainty, but certainly a strong indication of the #Bitcoin macro turnaround… given the previous historical trend. pic.twitter.com/HiuPDT9xiU
Bitcoin Price Outlook
Bitcoin was trading flat on the day at $20,510 at the time of writing, according to CoinGecko. It has made just over 6% over the past seven days but is trailing off from a double top formation suggesting further losses.
Bitcoin is currently down 70% from its all-time high almost a year ago, and the bears are not out of the woods yet.