As Bitcoin spiked through the resistant level of $23,000 after dipping below $19,000 recently, many expected that the breakout signaled a short-term relief rally.
Glassnode’s weekly report predicts that the major cryptocurrency is forming a “true bottom” as its current realized value is around $22,000. Meanwhile, on-chain data has shown that the unrealized loss of Bitcoin holders has reached an all-time high that could suggest the bloodbath is coming to an end.
The Bottom Is Near
Glassnode found that the primary cryptocurrency has always been in the bear market whenever it trades below its realized price. Time spent below such a level ranges from 157-days from 2011 to 2012 and 301 days from 2014 – 2015 to 301-days in 2018. So far, in 2022, Bitcoin has only spent 35 days below the realized price – a metric that indicates the on-chain cost basis of the Bitcoin supply.
Another measure that indicates the relative strength of the asset is the unrealized loss. It shows the severity of the market wipeout as well as the percentage of holders underwater. During the sharp market pullback between May and July, BTC’s unrealized loss was between $165 billion and -$198 billion, representing 55% of the equivalent market capitalization. The percentage is higher than the level recorded during the crash of 2020, but still lower than the magnitude of the bear market lows of 2018, as it signals that the market bottom may be forming.
During previous cycles, the signal of market recoveries always came with a sharp rise in the number of short-term holders having their positions in profit, Glassnode said. Similar to the past, when Bitcoin was at cyclical bottoms, no short-term Holders, at present, are in profit as the asset’s price has dipped under most of their acquisition prices. It means we are at an accumulation zone from which the market could bounce back speedily.
From other bear markets in the past, the analytics firm noted that a deep capitulation event had to occur as the final nail in the coffin to weed out any remaining misfits and create seller burnout. Two stand-alone events occurred during Luna’s collapse, triggering total realized losses of $27.77 billion and $35.5 billion over a 30-day window, respectively. The company has concluded that a bottom formation may be underway after a liquidation of such magnitude.
Grayscale Said Otherwise
A newly released report by Grayscale Investments, which also compared the current bear market with others in the previous cycles, deduced that the ongoing crypto winter could last for another eight months if it follows the same pattern as demonstrated in the past.
The asset manager believed that the current period represents the best buying opportunity and added that regardless of the severity of every bear market in history, the industry has always rallied stronger than before.
