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Highlights
- The prices of crypto assets have plummeted from Q1 2024 highs.
- Participants have flagged the creeping signs of a crypto bear market.
- Signs include reduced investments, whale transfers, depleted miner reserves, etc.
The crypto bear market is characterized by certain events and price trends marking the end of the block cycle. Crypto assets are trading sideways after a period of correction as prices nosedived. This fall in the market saw negative sentiments creep in among holders and traders after slow activities.
Signs Of A Crypto Bear Market
The digital asset market records cycles which shape the dominant investment narrative and industry drivers. This year, the market spiked into a bull phase after the United States Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. While the asset price spiked above $73,000 alongside other assets hitting highs not seen in months, recent activities have led to many signals of a looming bear market. Here are signs of watching out for a change in market sentiment.
Sharp Decline In Asset Prices
A significant price drop from all-time highs or cycle peaks is the most common determinant of a creeping crypto bear market. This is because all other factors lead to a slump in asset prices. At press time, Bitcoin price trades at $57,736 making a recovery below $55k from its previous highs. Market participants have flagged the reduced sentiment as multiple factors led to the price decline of Bitcoin and altcoins.
Reduced Whale Accumulation
Massive digital asset sell-offs can impact the crypto market. Whale transactions are known to drive other players within the space because of their holdings. The crypto bear market is characterized by reduced activities for large holders. Most times, whales ignite a selling spree as they dump assets.
In the past weeks, digital asset whales have continued to sell assets in large numbers leading to a nosedive of prices. Recently, XRP whales dumped a huge number of assets amid the settlement with the SEC. Other asset whales also sold assets as the price of Bitcoin slipped below $55k.
The whale sold 20,000 $SOL($2.66M) again 12 hours ago.
Since Jan 1, this whale has sold a total of 715,000 $SOL($102M) and still has 1.84M $SOL($246M) staked.https://t.co/ynMBHlFZ8H pic.twitter.com/b58pBCJWEF
— Lookonchain (@lookonchain) September 10, 2024
Depleting Miner Reserves
Bitcoin mining reserves are a way of pointing to the current maker cycle. Mining companies do not sell all their crypto adding a large part to their balance sheet. This is due to many reasons especially to diversify portfolio and aid investments. An upward movement in prices would mean increased profits for miners to increase energy efficiency and other facilities.
However, during a bear market, miners have to sell off tokens to stay above water as a result of dwindling asset prices. This was seen during the 2022 bear market heightened by the collapse of crypto firms.
Low Institutional Demand/ Investment
This year, there has been a significant uptick in institutional demand on the heels of Bitcoin ETF approvals. This created a new window for traditional investment into the market. The successes of their products led to applications for other crypto ETFs and venture capitalist investments in other sectors. A decline in VC funding from Q1 and Q2 positions points to lower sentiment ushering in a bear phase. Low institutional funds lead to reduced participation and a possible crypto bear market.
Asset Flows To Exchanges
This is a traditional way of spotting an imminent bear market. A sudden movement of assets by crypto whales to centralized crypto exchanges is a sign of low market confidence. Asset transfers to exchanges are seen as bearish because they can lead to an imminent sale while movements out of exchange signify long-term holdings in other custodians. Recently, crypto whales moved assets to centralized exchanges following the market correction.
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