Why The 2022 Crypto Bear Market Is Different And Its Implications

The drawdown in the crypto market has seen new trends emerge in the market. With the recent crash, bitcoin has seen some first-of-its-kind movement. The implications for these are vast given that the digital asset’s future movements are being recorded. This has shown that the recent bear market is different from every single one that has preceded it.

Bitcoin Falls Below Cycle High

One trend that bitcoin has always followed has been the fact that its price has never fallen below its previous cycle peak. For all of the previous bear markets, this trend has held and has been a form of a beacon when it comes to calling the bottom of the bear market. This is why a lot of analysts had called the bitcoin bottom using this trend.

Now, though, for the first time ever, the price of bitcoin has fallen below its previous cycle peak. This happened when the price of the digital asset had broken below $20,000 and hit a low of $17,600. It has since recovered from this point but it had already set a new precedent, which is, that the price of the cryptocurrency does not necessarily always hold above its previous cycle peak.

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The implications of such movements are varied but one obvious one is the fact that bitcoin can fall lower. Coupling this with the fact that previous cycle lows have always reached above 85% of its all-time high, and bitcoin not holding above $19,000, then a fall to $12,000 remains on the cards.

Glassnode also notes that the Mayer Multiple had fallen below its previous cycle low. It had previously bottomed at 0.511 but this had touched a new low of 0.487 in June. The report also notes that in 4,160 trading days, only 2% of trading days have recorded a MM below 0.5. This represents a change to the fundamental models that are used to value the digital asset.

MM falls below previous bottom for the first time | Source: Glassnode

Crypto Investor Sentiment Plummets

Investor sentiment in the market has been declining for quite some time now. The Fear & Greed Index has now spent one of its longest stretches in the extreme fear territory and it doesn’t look like this will be changing anytime soon. Interestingly, the index had also closed out the previous month in the extreme fear territory.

BTC declines to $20,600 | Source: BTCUSD on TradingView.com

This sentiment also shines through in the exchange inflows. Glassnode Alerts shows that there was more than $5.6 billion in BTC flowing into exchanges last week alone. Although the outflows had surpassed inflows, the sheer volumes moving into centralized exchanges show that sell-offs remain the order of the day.

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However, the Tether inflows paint a better picture for the crypto market with $4.3 billion in positive net flows for last week. This indicates that investors are moving their stablecoins to exchanges presumably to invest in other cryptocurrencies, signaling a return in positive sentiment among investors.

Featured image from Coingape, chart from TradingView.com

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