Bitcoin (BTC) is now officially in its second-longest bear market, having just exceeded the duration of the downturn back in 2018. Even as bulls pin their hopes on the 2024 halving event and the tailwind effects that precede it, the world’s premier cryptocurrency is likely in for a lot more pain. Let’s delve deeper.
Bitcoin Bulls Are Likely to Experience Further Losses Ahead
A growing body of evidence suggests that the cyclical lows for Bitcoin lie firmly below the prevailing price.
Past Bear Market corrections include: • -93% in 2011 • -82% in 2013 • -86% in 2015 • -84.5% in 2018 • -72% in 2020 (COVID) Most previous retraces have been deeper & more bearish#Crypto #Bitcoin — Rekt Capital (@rektcapital) November 14, 2022
Bitcoin typically registers a loss of over 80 percent relative to its previous all-time high. In fact, the very short-lived downturn during the peak of the COVID-19 crisis was the only exception to this rule. At present, Bitcoin is only down 76 percent relative to its all-time high of $69,000. This suggests that further losses likely lie ahead.
Monthly MPL by @whale_map🌐 makes it almost sure, in most cases, to determine the global bottom of $BTC. The condition is that the current loss level must be equal to or > than the max profit level of the previous bull run.$BTCUSD #btc #bitcoin #ビットコイン @jobtcfx pic.twitter.com/O2heJsD2jS — barovirtual.com (@BaroVirtual) November 22, 2022
The Twitter account @whale_map regularly publishes Moving Profit and Loss (MPL) figures for on-chain Bitcoin transactions. Baro Virtual recently identified a very sound method of identifying a cyclical bottom for BTC. Basically, the current loss level, as dictated by the MPL tabulation, must exceed the maximum profit level of the previous bull run. So far, such losses stand at $671 million, while the maximum profit of the previous bull run stands between $1.3 billion and $1.7 billion. This suggests that Bitcoin on-chain transactions have to record further losses of “$629M to $1.029B” to firmly establish a cyclical bottom.
The previous two crosses resulted in -46% and -57% moves AFTER the cross was confirmed pic.twitter.com/Sl5rHsycN6 — Matthew Hyland (@MatthewHyland_) November 15, 2022
Mathew Hyland regularly published updates on Bitcoin’s 3-day MACD moves. A few days back, the MACD crossed and closed in the bearish territory. The previous two crosses resulted in losses of -46 percent and -57 percent, respectively.
Let’s take a look at the three previous Weekly Candles Last week $BTC turned the lows of two weeks ago into new resistance (black) This week, BTC may be turning the lows of last week into new resistance (blue)#Crypto #Bitcoin pic.twitter.com/5RydBOkGms — Rekt Capital (@rektcapital) November 22, 2022
As per the tabulation by Rekt Capital, Bitcoin keeps creating new resistance levels.
Most aggressive miner selling in almost 7 years now.Up 400% in just 3 weeks! If price doesn’t go up soon, we are going to see a lot of Bitcoin miners out of business. pic.twitter.com/4ePh0TIPmZ — Charles Edwards (@caprioleio) November 21, 2022
Bitcoin miners are selling at the most aggressive levels in almost 7 years. While this is supportive of a bottom-formation process, further losses are likely to lie ahead in the short term.
The World Cup Effect: Wu Blockchain recently compiled an interesting piece of evidence. As per the research by academics led by Alex Edmans, global risk markets underperform during the FIFA World Cup, which are periods that are characterized by lower-than-average market volume. Given the sizable correlation that still exists between Bitcoin and U.S. equities, this weird phenomenon also supports the thesis that further losses lie ahead for the world’s premier cryptocurrency.
Halving Event Is the Proverbial Light at the End of the Tunnel
All is not doom and gloom around Bitcoin, however. Let’s present some pieces of evidence to support that a cyclical bottom is nearby.
— On-Chain College (@OnChainCollege) November 22, 2022
Bitcoin has entered capitulation territory, as measured by Net Unrealized Profit/Loss.
My landlord friend in Dallas just asked me if I know anything about bitcoin miners: “This bitcoin mining company defaulted, moved out, and left all their equipment behind.” 200 Antminers 🏃🏽♂️💨 pic.twitter.com/qUNStCYT5F — Zack Guzmán (@zGuz) November 21, 2022
Miners are abandoning their equipment.
Drain. Them. All. pic.twitter.com/mLTqBlvsGY — Dylan LeClair 🟠 (@DylanLeClair_) November 22, 2022
The FTX saga has spurred a historic migration off exchanges. This should help curb the selling pressure on Bitcoin.
Probably nothing… pic.twitter.com/ElcN9xJIyO — Dylan LeClair 🟠 (@DylanLeClair_) November 22, 2022
People are HODLing
— Coinbase Institutional (@CoinbaseInsto) November 22, 2022
Just 7.9 percent of institutional investors expect higher crypto prices in the next 12 months. This is indicative of a capitulatory mindset.
This happened as @coinsharesco spotted 75% of the total inflows coming from short products: https://t.co/q92J31erbC — COIN360 (@COIN360com) November 22, 2022
Investors are shorting Bitcoin and Ethereum like crazy. This will provide the requisite fuel for a rip-roaring rally once the bottom has been formed.
2013 > 4 quarters post halving2017 > 5 quarters post halving2021 > 6 quarters post halving Notice the pattern?#bitcoin past bottoms: 2015 > 6 quarters before next halving2018 > 6 quarters before next halving2022 > 6 quarters before next halving ?? pic.twitter.com/C1qKOX4Dbo — VX (@veraximago) November 22, 2022
But perhaps, our most important evidence lies in the tweet above. Notice that Bitcoin bottomed out in 2015 and 2018 around 6 quarters ahead of its halving event. The next halving event is scheduled for April 2024 or Q2 2024. This analog suggests that Bitcoin should bottom in Q4 2022, as we detailed in a previous post.
Do you think that the frigid nights for Bitcoin and other cryptocurrencies are about to end soon? Let us know your thoughts in the comments section below.
