The crypto economy has slipped under the $1 trillion mark to the $970 billion range, as a large number of digital currencies have lost more than half their USD worth since November 2021. Bitcoin is down 70% from the all-time high last year, and a new report from Glassnode Insights calls the current bear market “a bear of historic proportions,” while highlighting that “it can reasonably be argued that 2022 is the most significant bear market in digital asset history.”
Glassnode Researchers: ‘Bitcoin Is Currently Experiencing the Largest Capital Outflow Event in History’
Many people understand that the crypto economy is currently in a bear market but no one knows where it will lead or when it will end. Bitcoin and the crypto economy, in general, have been through several bear markets and a recent Glassnode Insights report claims it just might be the worst on record. The analytics company Glassnode provides an analysis of bitcoin’s (BTC) current price drop and how the digital asset slipped below the 200-day moving average (DMA). The 40-week timespan gives traders perspective on whether or not the current trend will continue dropping lower and it can also identify potential floor prices.
Glassnode’s post describes the Mayer Multiple and the 200DMA and how they can signal a bear or bull market. “When prices trade below the 200DMA, it is often considered a bear market,” Glassnode’s analysis notes. “When prices trade above the 200DMA, it is often considered a bull market.” Additionally, Glassnode leverages data like “realized price,” “realized cap,” and the market value and realized value oscillator (MVRV Ratio).
“The 30-day position change of the realized cap (Z-Score) allows us to view the relative monthly capital inflow/outflow into the BTC asset on a statistical basis,” Glassnode’s blog post explains. “By this measure, bitcoin is currently experiencing the largest capital outflow event in history, hitting -2.73 standard deviations (SD) from the mean. This is one whole SD larger than the next largest events, occurring at the end of the 2018 Bear Market, and again in the March 2020 sell-off.”
Glassnode has been researching and discussing the current bear market for quite some time and on June 13, it published a video called “The Darkest Phase of the Bear.” The video looks into whether or not it is the final phase or final capitulation period in bitcoin’s price cycle. Historically, BTC has dropped 80%+ lower on all of its major bear markets and an 80% drop in price from $69K is $13,800 per unit. Some crypto investors believe the end of the bear may be near while others think max pain has not arrived yet. Max pain, the depths of despair, the lowest of lows, or the bottom may not be in yet.
Glassnode’s report details that because bitcoin got so large, the impact has been magnified. “As the bitcoin market matures over time, the magnitude of potential USD denominated losses (or profits) will naturally scale alongside network growth,” Glassnode’s research report says. “However, even on a relative basis, this does not minimize the severity of this $4+ billion net loss.”
Glassnode researchers also delve into ethereum (ETH), a coin that often drops lower than BTC’s 80% drawdown. “Ethereum prices have spent 37.5% of its trading life in a similar regime under the realized price, a stark comparison to bitcoin at 13.9%,” Glassnode researchers wrote. “This is likely a reflection of the historical out-performance of BTC during bear markets as investors pull capital higher up the risk curve, leading to longer periods of ETH trading below investor cost bases.”
The current cycle low of the MVRV is 0.60, with only 277 days in history recording a lower value, equivalent to 11% of trading history.
Last week, BTC and ETH prices increased in value after taking a hard hit the week prior and remained consolidated for most of the week. BTC prices are still down 8.1% during the past two weeks and the crypto asset’s USD value is down 0.3% over the last 24 hours. ETH values have slid 0.1% during the last 24 hours and two-week stats show ETH is down only 1.3% against the U.S. dollar. Glassnode’s post shows that the data and studies done point to one of the most significant crypto bear markets in history.
The Glassnode Insights report concludes by saying:
The various studies described above highlight the sheer magnitude of investor losses, the scale of capital destruction, and the observable capitulation events occurring over the last few months. Given the extensive duration and size of the prevailing bear market, 2022 can be reasonably argued to be the most significant bear market in the history of digital assets.
What do you think about Glassnode’s bear market report? Would you say that this is one of the worst bear markets on record? Let us know what you think about this subject in the comments section below.