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With Bitcoin languishing over 73% below its November highs, the token has decidedly entered a bear market.
But several macroeconomic factors make this bear market different from the ones seen in 2020 and 2018, complicating the timing of a recovery. This has also seen crypto markets experience one of their worst drawdowns in history- down over $2 trillion.
On the technical front, a recent report from on-chain data firm Glassnode shows that Bitcoin is experiencing its largest capital outflow in history, significantly larger than past bear markets.
The token, which accounts for 43% of the crypto market, is trading well below its realized price, indicating that most investors are holding the token at a loss.
Bitcoin is trading around $21,400. There appear to be few factors that could spur an immediate recovery
Technical indicators paint a sorry picture for Bitcoin
Glassnode pointed out that while Bitcoin prices are around the upper bound of previous bear market losses, other technical factors show more market pain.
The token has slumped so far below its 200-day moving average that only 2% of its trading days in history have ever been worse off. This also occurred at much lower valuations. According to Glassnode, spot prices are currently at an 11.3% discount to the realized price, indicating that the average trader is now “underwater.”
Such a scenario had indicated a bottom during previous bear markets. But that does not seem to be the case here. Capital outflows are also at their worst for the token, even more than the 2020 COVID-19 crash.
We can now conclusively claim that the 2021-22 Bitcoin bear market is one of, if not the most significant in history
-Glassnode analysts
Unprecedented macro factors also weigh
While Bitcoin has traded through previous Federal Reserve hiking cycles, this its first cycle as a popular investment vehicle. It is also the token’s first major tryst with rampant inflation and recessionary risks.
The token was initially pipped as an effective inflation hedge. But it has largely failed at this role in 2022.
With the Fed set to keep hiking rates until at least the end of the year, Bitcoin is expected to remain subdued.
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