Crypto markets are cyclical in nature, and market observers feel that certain patterns repeat themselves over time. BTC has already dropped over 70% from its peaks, which may be alarming to new traders and investors, but the fact remains that the BTC price has dropped over 80% three times since 2011. And there are some parallels between past periods and the current market capitulation.
Historical In/Out of the Money by Intotheblock, a blockchain analytics firm, illustrates the percentage of addresses that would be gaining or losing money with their BTC holdings. According to IntotheBlock’s most recent medium blog post, between 2011 and 2012, more than 84 percent of the addresses holding BTC were making a loss.
There was no such thing as a crypto sector back then, hence BTC was largely utilized for illegal purchases on black markets. After that, Bitcoin’s price recovered a year later.
Between 2015 and 2016, a similar tale played out, with up to 68% of addresses losing money at some point. A year later, the price rose to new all-time highs. In the following bear market of 2018–2019, it turned out that not many people had bought the top: at its worst, only 52% of the addresses were losing money.
Fast forward to the present, and only over half of all addresses (50%) are still holding at a loss. While this does not rule out further price declines, it does appear that we are approaching the levels witnessed during the previous bear market.
As can be observed, the number of addresses that hold at a loss over each bear market cycle continues to decrease.
Closer to the Bottom?
Mike Novogratz, the founder, and chief executive officer of Galaxy Digital Holdings Ltd., said that cryptocurrencies are closer to a “bottom” than the U.S. equity market.
“Ethereum should hold around $1,000 and it’s $1,200 right now.” “Bitcoin is around $20,000, $21,000, and it is $23,000, so you are much closer to the bottom in crypto than you are where I think stocks are going to have another 15% to 20% decline,” Novogratz said at the Morgan Stanley Financials Conference.
Guggenheim’s Scot Minerd wrote in a recent tweet: “The collapse of crypto is the canary in the coal mine.” Crypto told us ahead of time that stocks were going to be in trouble. And until we find a bottom here in crypto, we’re not going to get a bottom in anything else. “
Bitcoin, the largest digital asset, fell as low as $20,079 and was trading at $20,632 at press time. According to Bobby Lee, Ballet Global Inc. CEO, “Bitcoin might test $20,000 and go to $19,000-$18,000.”
The second-largest cryptocurrency, Ethereum, dropped as low as $1,067. Both have slumped 70% and 78%, respectively, since hitting record highs in early November.
When market enthusiasm hits and price starts to rise rapidly, according to onchain analytics firm Intotheblock, the balance of addresses that have been holding for over a year (“Hodlers”) tend to sell some of their BTC. While they frequently continue to accumulate at even quicker rates once the frenzy has passed.
This trend was repeated in 2019 and is being repeated now. The bottom was reached in 2019 when the balance of these “hodlers” reached an all-time high, which is currently occurring.
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