Crypto markets have been in a bear cycle for just over a year now which is uncannily similar to those of previous market cycles.
Bear markets always appear to be long, drawn-out affairs, but the steep downtrend only really lasts a year or so.
The crypto industry hit its all-time high of just over $3 trillion in market capitalization in November 2021. Almost a year to the day later, on Nov. 22, they hit a cycle low of $820 billion, marking a 73% drawdown.
In its recent “Ahead of the curve” report, Arcane Research observed that this bear cycle now matches those in 2014 and 2018 in terms of length.
“BTC’s bear market has now lasted at lengths comparable to the bear markets of 2014-15 and 2018.”
Bear Market Bottom?
However, in the previous cycle, markets fell 87% from $830 billion in January 2018 to just over $100 billion market cap in December of the same year. The magnitude of this current one has not been as great despite the collapse of Terra/Luna and FTX.
What followed the cycle low was a long period of consolidation and slow accumulation, which is what we could be seeing at the moment.
The report noted that the current Bitcoin market (not total crypto cap) has seen a 376-day period from peak to trough. In 2018, that period was 364 days, and in 2014 it lasted 407 days.
“Thus, while the current drawdown duration has been at comparable lengths to previous cycles, the depths are higher for now.”
Markets have lifted around 10% from the current bear market bottom last week. Roughly $80 billion has gone back in lifting total capitalization over $900 billion again.
Bitcoin drives cryptocurrency markets.— Murad (@MustStopMurad) November 30, 2022
Bitcoin is driven by 4-year halving cycles.
Bitcoin's last global bottom was in December 2018.
Tomorrow is December 2022, 4 years later. pic.twitter.com/EivaIJ772f
FED Pivot Good For Crypto
Other influences could also spell the market bottom and a trend change. The U.S. Federal Reserve’s pivot to less aggressive recovery measures could mean lower and fewer interest rate hikes next year. This would be good news for risk-on assets such as tech stocks and crypto, which have all been battered this year.
The Fed is pivoting. The language starts soft and preps the market. Right on schedule for Q1.— Charles Edwards (@caprioleio) November 30, 2022
So we have:
– Ultra undervalued Bitcoin
– Leverage completely wiped out
– indications of a changing policy
The stage is set. pic.twitter.com/gQTjSxMXYe
With all of the leverage wiped out of crypto markets, only the hardcore hodlers and those with full conviction remain.
Bitcoin has reclaimed $17K this week, and Ethereum has topped $1,300 again, so a longer-term trend change could be starting to form. However, there is unlikely to be a full bull market until sometime later this year when regulations are ironed out, and institutions return to the asset class.