Bitcoin (BTC) price today reached $60,000 (USD), down more than 50% from its all-time high of $126,000 set four months ago. Although it has since recovered to 70,000, market weakness is fueling bearish expectations.
“Bitcoin is in capitulation and we need to understand this,” said Joanne Wesson, founder and CEO of Alphactal, a market intelligence firm specializing in cryptocurrencies. In his opinion, on-chain data makes it very clear that Reflects the possibility of further price declines.
Specialists start with the Market Decline Oscillator, an indicator that measures the strength of market declines on a continuous scale from 0 to 1. This is based on three factors: the severity of the hash rate drop, the magnitude of the price drop, and the level of supply activity within the network.
Lower values suggest early stages of stabilization or recovery. Rather, the higher the value of this indicator, the greater the pressure to surrender. Therefore, “we have officially entered a phase of capitulation, characterized by large realized losses,” Wesson said.
At the same time, Bitcoin’s annual Sharpe ratio, which measures risk-adjusted returns, is currently negative. For businessmen, this “creates a gray environment.”
That’s because “when this happens, the market enters a slow, silent accumulation phase, while volatility begins to decline and risk appetite declines.” Does that mean Bitcoin’s capitulation is over? He answered “no” because such demand usually does not exceed supply.
On-chain data shows no signs of bottoming out
To support his theory, Alphactal’s CEO highlighted that according to the Market Calm Index, the most aggressive capitulation occurs in Phase 3. This indicator identifies extreme tensions when combining yield signals in hash, price, and supply.
“Values of 2 or 3 indicate situations typical of severe stress, forced selling, and market lows,” he explained. That’s what we’ve seen in past crypto winter funds. Instead, A reading of 0 or 1, as it currently is, typically corresponds to an environment that is considered normal. of the market.
In conclusion, he believes that “unfortunately the market has not stopped suffering yet.” Along these lines, he stressed that surrender should not be interpreted as a sudden moment. This is a “time-consuming” process and requires multiple false price recovery attempts.he expressed. For this reason, he recommends ignoring the “noise” and “emotional narratives” that tend to proliferate in the face of intense movement.
This perspective is consistent with Bitcoin’s historical movement. The currency always culminates in a bull cycle with a new record price the year after a halving, followed by a prolonged crypto winter. According to a report from CriptoNoticias, that bearish season has lasted about the past year. Therefore, if this pattern repeats, It will still take about 8 months for Bitcoin to reach the bottom..
Conflicting predictions about how Bitcoin will survive
Anyway, every Bitcoin bear cycle, shorter and lower total drop To the previous one. This maintains the expectation that this will not be an exception, especially when it comes to institutional investment in the market.
Unlike this time, there were no Bitcoin exchange traded funds (ETFs) during the last crypto winter, which ended in 2022. There was also no army of public companies dedicated to this treasure trove of assets, and governments like the United States had no interest in the market.
“The end of winter for cryptocurrencies is very similar to the current one: despair, exhaustion, and malaise,” said Matt Hogan, chief investment officer at Bitwise, a company that issues crypto ETFs. “We will come back with strength sooner or later. “Spring is approaching,” he said. The reason is that “nothing will fundamentally change in the current market downturn.”
Still, some prefer to remain vigilant. “I would like to continue to stress that the stock market has not corrected yet. In my opinion, we are getting closer to a correction,” said economist Daniel Mbudi. “In that scenario, I don’t think we can call it a floor yet, as BTC is likely to follow market trends. “We don’t have time,” he added. nevertheless, He considered the rebound near $60,000 a “good sign.”close to the moving average of 200 on a weekly basis.
Some analysts see the sharp price drop that Bitcoin experienced this week as a forced selling event. Among them, Ki Yong-joo, CEO of on-chain data company CryptoQuant, believes this. Can create a domino effect of greater surrender.
“Absent a significant rally at these levels over the next month, the risk of institutional structural and chain selling increases significantly,” the CryptoQuant CEO said. “As funds are liquidated and prices fall, miners are going bankrupt and the last remaining retail investors are being forced to cut their losses,” he elaborated. Therefore, he believes there is a good chance that the bearish situation will continue.
