“When will it end?” It is the question on the minds of investors who have endured the current crypto winter and witnessed the demise of many protocols and mutual funds over the past few months.
This week, Bitcoin (BTC) finds itself once again testing resistance at its 200-week moving average and the real challenge is whether it can push higher in the face of multiple headwinds or if the price will head lower to the range it has been trapped in since early June.
According to the latest on-chain market intelligence company Glassnode, “duration” is the main difference between the current bear market and previous cycles, and many on-chain metrics can now be compared to these historical declines.
One metric that has proven to be a reliable indicator of bear market bottoms is price achieved, which is the value of all Bitcoin at the price at which it was purchased divided by the number of BTC in circulation.
The number of days the bitcoin price has traded below the realized price. Source: Glassnode
As shown in the chart above, with the exception of a quick crash in March 2020, Bitcoin has been trading below its actual price for an extended period of time during bear markets.
“The average time spent below the realized price is 197 days, compared to the current market with only 35 days on the clock.”
This may indicate that the current calls for an end to the crypto winter are premature as historical data indicates that the market still has several months of sideways price action ahead of the next major uptrend.
Will the bottom be closer to $14,000?
When it comes to what traders should be looking for that would signal the end of winter, Glassnode highlighted delta and equilibrium price as “on-chain pricing models that tend to attract spot prices during the late stage of the bears.”
Realized Bitcoin, Delta Balances and Prices. Source: Glassnode
As shown in the chart above, previous major bear market lows were identified after a “short term wick down to delta price,” which is highlighted in green. A similar move in the market today may point to a drop in BTC near $14,215.
These bearish periods have also seen Bitcoin price trade in an accumulation range “between balanced price (low range) and realized price (high range)”, which is where the price is currently finding itself.
One classic sign of the bear market coming to an end was a major capitulation event that exhausted the last remaining sellers.
While some are still debating whether or not this happened, Glassnode highlighted the activity on the chain during the June drop to $17,600 as a possible sign that capitulation has indeed occurred.
The total supply of bitcoin is at a loss. Source: Glassnode
While BTC dropped to $17,600, there was a total volume of 9.216 million BTC carrying an unrealized loss. After the capitulation event on June 18, a month of consolidation and a price spike to $21,200, that volume has now fallen to 7.68 million bitcoins.
“What this indicates is that 1.539 million BTC last traded (on a cost basis) between $17.6K and $21.2K. This indicates that about 8% of the circulating supply was traded in this price range.”
Another clue that a capitulation has already occurred is the “staggering volume of BTC” that led to a real loss between May and July.
Total bitcoin losses in 30 days. Source: Glassnode
The Terra crash caused a total realized loss of $27.77 billion, while the June 18 plunge below the all-time high of the 2017 cycle resulted in a total realized loss of $35.5 billion.
Related: Bitcoin Below $22,000 Looks Attractive When Compared To The Market Cap Of Gold
Is this the end of the bear market?
One final metric that indicates that a surrender has actually occurred is the adjusted Output Spent Profit Rate (aSPOR), which compares the value of the output in the time it was spent when it was created.
Spor modification of Bitcoin. Source: Glassnode
According to Glassnode, when profitability declines (as represented by the blue arrows), investors incur significant losses that ultimately lead to a “last moment of capitulation,” which is highlighted in red.