Is the bottom in for Bitcoin? Market sell-off set to continue, analysts say

We have not yet reached the bottom.

That’s the conclusion reached by analysts at the Huobi Research Institute, Huobi’s research arm. cryptocurrency exchange, reached in a recently published report.

In his report, titled “Is another black mayo coming?”, Huobi researchers Barry Jiang and Hanson Chan wrote that, when it comes to Bitcoin“The bottom of the market is yet to come, and value investors should refrain from buying.”

Huobi’s reasoning stems from the argument that the market bottom for Bitcoin can be determined by examining your net unrealized gain/loss (NUPL) percentage, which is the difference between Bitcoin’s market capitalization and its cap made divided by its market capitalization.

Bitcoin’s realized cap represents the realized value of all coins in the network, based on the price at which each unspent transaction output moved for the last time. The limits made do not take into account lost or inactive coins.

The NUPL has five different classifications: elation/greed, belief/denial, optimism/anxiety, hope/fear, and capitulation. The capitulation phase is when the price is at its lowest point and is therefore the best time for buyers to jump, according to this reasoning. According to Bitcoin’s NUPL chart, the asset is currently in the fear classification and thus it is likely that it has not yet reached its minimum price for the current cycle.

As an on-chain data analysis platform cryptoquantificationThe Bitcoin NUPL assessment explains: “Investors are [currently] in a phase of fear where they currently find themselves with unrealized gains that are little more than losses.”

Jiang from Huobi said decipher via email estimating the Bitcoin fund to be somewhere between $20,000 and $25,000. Yuya Hasegawa, a market analyst at Japanese cryptocurrency exchange Bitbank, has a less optimistic outlook.

“From the previous two capitulation phases, we can see that the price fell by about 40-50% after NUPL turned orange. [to Hope/Fear]. So if the pattern replicates itself, the current price of bitcoin could drop to around $15k. This is somewhat in line with my technical analysis released on Monday (although my price target is slightly lower: $12.2k),” Hasegawa said. decipher via email.

Bitcoin today broke firmly below $30,000, hitting a low of $28,170his lowest price since December 2020.

Image: The green area is where some analysts predict Bitcoin will “bottom out” in a declining market. From lookintobitcoin.com.

Benjamin Cowen, crypto analyst and CEO of quantitative market analysis platform Into The Cryptoverse, said decipher that, according to a number of different metrics, “there are still more potential downsides” in today’s market.

Image: CoinMetrics/Benjamin Cowen

“The 1 year running [return-on-investment] it shows there could be more downside,” Cowen said, referring to a chart with data from analytics firm CoinMetrics, adding that the number of long-term (6+ month) Bitcoin holders also plateaued a few months ago.

Image: CoinMetrics/Benjamin Cowen

Public interest in cryptocurrencies also appears to be on the decline for now, as data pulled from social media analytics site Social Blade shows that major crypto YouTube channels are losing viewers across the board.

Image: Social Sheet / Benjamin Cowen

But regardless of where the retail investor stands on crypto, some analysts believe that on-chain metrics like the NUPL are not helpful at all in this current climate.

“To be honest, I find on-chain metrics pretty useless in today’s market, as Bitcoin is clearly connected to the stock market during this scary market,” said Bendik Norheim Schei, head of research at Arcane Research. decipher via email.

“The correlation with Nasdaq is at its highest point and investors they are putting Bitcoin in the same basket as risky tech stocks,” Schei added.

So how can investors determine where the price of Bitcoin could go in the coming weeks and months?

“The stock market is the leading indicator for Bitcoin right now,” Schei said. “The current $30,000 The level being tested this week has been a pretty strong support level going into 2021 and it currently holds, but I wouldn’t bet on that if the stock market continues to drop,” he said.

GlobalData Senior Analyst Lil Read shared a similar view, but also argued that cryptocurrencies are not currently working as a hedge against inflation.

“Many cryptocurrency investors see the fact that they are not tied to the value of traditional assets, such as gold, company shares, or fiat currencies, as intrinsic to the attraction and value proposition of cryptocurrencies,” Read said. decipher via email. “Some crypto bulls even looked at crypto as an asset to hedge against inflation, but that is clearly not working – the reality is that, at least in recent weeks, crypto has followed broader market trends.”

Read cited the recent decision by the US Federal Reserve to raise interest rates as the main trigger for downtown, adding that “in an environment of rising interest rates, investors generally become more risk averse.” In Read’s opinion, “price dynamics in crypto will likely mirror broader market trends until we see a new level of stability, which may take a few months or even years.”

Disclaimer

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.

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