Bear market traders have historically been difficult to manage and the set of classic “reliable” indicators that determine good entry points cannot predict how long a crypto winter will last.
The recent Bitcoin (BTC) Rally above the psychologically important $ 20,000 price level was a signal to many traders that the bottom has been reached, but a deeper dive into the data suggests that may not be enough the short relief rally term on trend change at the macro level.
A recent report from cryptocurrency research firm Delphi Digital, which suggested “we need to see a little more losses before we can be confident that the market has collapsed,” shows that caution must be exercised.
Despite the pain already felt since the peak price of bitcoin in November, a comparison between its withdrawal since then and the market peak of 2017 raises the possibility of further near-term declines.
In previous bear markets, the price of BTC has fallen by about 85% from its peak to the low end. According to Delphi Digital, if history were to return to the current environment, it would result in “just over $ 10,000 floor and another 50% drop to current levels.”
The outlook for Ether (ETH) is even bleak, as the bear market has previously seen its price fall 95% between peak and tank. If the same situation occurs this time, the price of Ether could go down to $ 300.
Delphi Digital said,
“The risk of a similar accident is higher than most people expect, especially if BTC fails to maintain support in the $ 14,000-16,000 range.”
Oversold conditions prevail
For traders who want to know where the bottom of the current market is, the data shows that “the previous large market volumes were at the same time as real selling conditions.”
As can be seen in the weekly chart below, BTC’s 14 – week RSI recently broke below 30 for the third time in its history, with the previous two times near a low market.
While some may see this as a sign that it’s a good time to re-enter the market, Delphi Digital warned those expecting a “V-shaped” recovery, noting “in the previous two cases , the BTC traded in a sideways choppy range for several months before a strong rally was finally held. ”
A view of the 200-week simple moving average (SMA) also raises the question of whether the level of support will hold back historically.
Bitcoin recently broke below its 200-week SMA for the first time since March 2020. Historically, the price of BTC has only traded below this level for a few weeks during previous bear markets, raising the possibility of a bottom get up early.
Read also: Bitcoin Price falls below $ 21,000 as Exchanges Record Recorded Outflow
The final surrender
What the market is really looking for right now is to historically mark the final capitalization of the end of the bear market and the beginning of the next cycle.
While market sentiment is now at its lowest point since the COVID-19 crash in March 2020, it has not fully reached the depth of despair seen in 2018.
By Delphi Digital:
“Maybe we need to see a little more losses before the mood really rises.”
Weakness in the crypto market has been visible since the end of 2021, but the real driver of market erosion includes rampant inflation and rising interest rates.
Market corrections usually follow the rise in rising interest rates, and as the Federal Reserve intends to wait for the course of rising rates, bitcoin and other risky assets are likely to be further corrected.
A final indicator that would suggest that a final capitation event must occur is the percentage of BTC supply in profit, which is previously 40% on the basis in bear markets.
This metric is currently at 54.9%, according to data from Glassnode, which adds credibility to the expectation that the market may experience another phase of decline before reaching the real bottom.
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