The drop in the crypto market has seen new trends emerge in the market. With the recent crash, bitcoin has seen some of the first movements of its kind. The implications of these are enormous given that future movements of digital assets are being recorded. This shows that the recent bear market is different from any previous market.
Bitcoin Drops Below Cycle High
One trend that bitcoin has always followed is the fact that its price has never dropped below its previous cyclical top. For all previous bear markets, this trend has been sustained and is a form of signaling when calling a bear market bottom. This is why many analysts have called bitcoin the bottom using this trend.
Now, however, the bitcoin price has dropped below its previous cyclical peak for the first time. This happened when the price of the digital asset broke below $20,000 and hit a low of $17,600. It has since recovered from this point but it has set a new precedent, which is that the price of a cryptocurrency does not necessarily always hold above its previous cyclical top.
The effects of such movements are manifold but one thing is clear that bitcoin could drop lower. Combine this with the fact that previous cycle lows have always been above 85% of its all-time high and bitcoin hasn’t held above $19,000, a drop to $12,000 is still on the cards. .
Glassnode also note that the Mayer Multiple has dropped below its previous cycle low. Previously, it bottomed out at 0.511 but this hit a new low of 0.487 in June. The report also notes that in 4,160 trading days, only 2% of trading days recorded MM below 0.5. This represents a change to the underlying models used to value digital assets.
MM falls below previous bottom for the first time | Source: Glassnode
Cryptocurrency investor sentiment
Investor sentiment in the market has been declining for quite some time. The Fear & Greed Index has now spent one of its longest periods in extreme fear territory and it doesn’t look like this will change any time soon. Interestingly, the index also closed last month in extreme fear territory.
BTC declines to $20,600 | Source: BTCUSD on TradingView.com
This sentiment is also reflected in capital flows. Glassnode Alert shows that there was over $5.6 billion in BTC flowing into exchanges in the last week alone. Even though outflows have surpassed inflows, the sheer volume moving to centralized exchanges suggests that the sell-off is still the order of the day.
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However, inflows into Tether paint a better picture for the crypto market with $4.3 billion in positive net inflows last week. This suggests that investors are moving their stablecoins to exchanges presumably to invest in other cryptocurrencies, signaling a return in positive sentiment among investors.
Featured image from Coingape, chart from TradingView.com
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