The Bitcoin bear market has entered its deepest phase yet. Many long-term holders who had previously been able to ride out the storm are now struggling due to the sudden selling pressure.
According to a report by Glassnode, which monitors the realized price of Bitcoin, the digital currency is currently around $1,000 below its current market value of $23,430. Bitcoin was trading at around $22,500 in New York on Tuesday afternoon.
"The current bear market is now entering a phase aligned with the deepest and darkest phases of previous bears," Glassnode strategists wrote. "The market, on average, is barely above its cost basis, and even long-term holders are now being purged from the holder base."
How Bitcoin's bear market affects investors
Market observers are trying to determine which groups of investors are most affected by the current bear market. As Bitcoin's price continues to hover around December 2020 lows, many new entrants are getting walloped. Meanwhile, UBS closely monitors the various Bitcoin miners due to their exposure to energy costs and CapEx commitments.
On another matter, digital-asset investors are also reacting negatively to the actions of Celsius Network Ltd., a crypto lender. The company suspended its operations and withdrawals last week after a key inflation figure came in higher than expected.
According to Lori Calvasina, an equity strategist at RBC Capital Markets, she would like to see Bitcoin stabilize. She noted that it has become a helpful indicator of investor sentiment.
According to the experts at Glassnode, a change in the net position of the so-called HODLers, who are the most ardent Bitcoin investors, can be used to estimate the amount of coin they're distributing or accumulating. This suggests that the accumulation of Bitcoin may be weakening. Since early May, the number of Bitcoin being transferred to the hands of these individuals has dropped by around 64%.
#BTC has reached the 200-week MA but the volume influx isn't as strong as in previous Bear Market Bottoms formed at the 200 MA
— Rekt Capital (@rektcapital) June 13, 2022
But downside wicking below the 200 MA occurs & perhaps this wicking needs to occur this time to inspire a strong influx of volume$BTC #Crypto #Bitcoin
Bitcoin trades like penny stock
Since the beginning of May, Bitcoin has lost about 30%. It fell by another 3% on Tuesday, marking its eighth straight day of losses. The rate of change during this period is the most significant drop in its history.
In an interview, Brian Nick, a senior investment strategist at Nuveen, said that the price of Bitcoin could continue to fall even after it has already dipped this low.
"Bitcoin trades like a penny stock," Nick said. "There's all kinds of reason to think that once it starts falling quickly, it can continue to fall. If it can move 20 percent in two days, it can move another 20 percent the next two days."
According to billionaire investor Mike Novogratz, Bitcoin will lead the markets higher once the Fed stops raising interest rates. The central bank's actions will cause the economy to slow down, which will cause Bitcoin to rally. Despite the Fed's dovishness, it's still hard for other risk assets to perform well due to its stance.
How altcoins perform
On the other hand, altcoins such as Ethereum fell to around 40% below the previous week's high. If it breaks below the $1,000 mark, it would be the first time since January 2021 that the pair has traded at three-digit prices. According to a report by Cointelegraph, the pair had already crossed its previous peak of $1,530.
According to Rekt Capital, altcoins had little reason to celebrate during this period. They noted that the lack of support in the market is a sign that investors are starting to lose faith in cryptocurrencies.
On-chain monitoring company Coinglass noted that cross-market liquidations involving the total amount of money traded in just 24 hours had passed through $1.2 billion.