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If this is a crypto bear market, how long can it last?

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It has now been three months since Bitcoin’s price peaked at an all-time high just shy of $65,000. For most of the last two months, Bitcoin (BTC) has been trading in the $30,000–$40,000 range, as much as 54% lower than its peak

The downturn came at a time when many analysts were predicting exactly the opposite — a bull cycle set to run to new record highs within months — with some even speculating that a six-figure BTC price would materialize this year.

So, what’s going on? Is the current market downturn just a blip on an otherwise upward trajectory, or is the crypto market back in the kind of long-term bearish territory last seen in 2018?

Bullish metrics

Bitcoin’s historical price activity has a compelling correlation with its halving cycles, with previous all-time highs being reached within around 12 to 18 months of a halving. PlanB, the creator of the Stock-to-Flow BTC price model, is among the most vocal proponents of this. On Twitter, the analyst remains resolute that the Stock-to-Flow Cross Asset Model (S2FX) predicts further bullish action, pointing to similar temporary downturns before epic rallies in previous cycles.

So far, the S2FX model has been one of the most accurate price predictors of Bitcoin over the years. In addition, on-chain metrics appear to support the theory that bearish sentiments could be short-lived. For instance, shortly after Bitcoin’s April price peak, traders suddenly started moving funds onto exchanges, ending an almost uninterrupted eight-month run of HODLing.

Igneus Terrenus, head of communications at crypto exchange Bybit, believes that short-term traders were responsible for the sell-off following BTC’s price highs. He told Cointelegraph:

“A series of deleveraging events shook off many short-term speculators, whose capitulation accounts for the majority of realized losses in recent months. While the euphoria at the start of the year has all but dissipated, whales and long-term holders have remained confident through the market’s overall bearish sentiments.”

However, over the recent weeks, trading platforms have once again seen funds flowing out. Glassnode’s Realized HODL Ratio, which tracks the willingness of investors to let go of their holdings, also appears to reflect similar patterns seen in previous cycles.

Richard Nie, chief research analyst at Bingbon, believes that the exchange flows are telling. Speaking to Cointelegraph, he concurred that the metrics indicate a bullish shift. “We ought to pay attention to the number of whale holders and the amount of BTC held by exchanges,” he said, adding that as “more BTC is withdrawn from exchanges and moved into private addresses, this is a strong bullish signal.”

Mati Greenspan, founder and CEO of Quantum Economics, told Cointelegraph: “Right now crypto volumes across exchanges are the lowest they’ve been all year. Once trading picks up again, that would be a good indication the lull is complete.”

Broader bullish indicators

Project funding is another significant indicator of market sentiment, and 2021 has been an outstanding year for crypto startups. As reported by Cointelegraph, the crypto industry saw more funding in the first quarter of 2021 than in all of 2020 put together, pulling in $2.6 billion.

The downturn since April doesn’t appear to have spoiled the appetites of venture capitalists at all. In late May, stablecoin issuer Circle raised $440 million, and only days later, Mike Novogratz’s Cryptology Asset Group announced it was launching a crypto investment fund worth $100 million.

By mid-June, Bloomberg had reported that the total venture capital investment in crypto for the year was already up to over $17 billion. Even discounting the $10 billion that Block.one directed into its new exchange venture, it’s sufficient to demonstrate that the crypto market’s second-quarter performance hasn’t yet affected the growth in venture capital investment.

There are also macro market factors to consider. Amid ongoing uncertainty surrounding the state of the global economy, some, including Robert Kiyosaki — author of Rich Dad Poor Dad — have predicted a stock market crash. In Kiyosaki’s case, he’s also been encouraging his followers to stock up on gold and Bitcoin. There are signs that Bitcoin may be becoming more correlated to stocks, but could a mass stock sell-off mean investors ultimately turn to BTC as a safe-haven asset?

A further consideration is Bitcoin’s upcoming Taproot upgrade due to activate in November. It marks the first upgrade to the Bitcoin network since the Segregated Witness (SegWit) fork, which took place in August 2017. Of course, that was followed by an epic run up to a new all-time high of $20,000 in December 2017. It’s hard to know if history could repeat itself in this regard or if there’s even any direct correlation between the upgrades and the markets, but it’s worth bearing in mind.

Bears in the form of regulators

It’s beyond doubt that the biggest bearish forces shaping the markets over the last few months have been regulatory. Most notably, the Chinese government’s mining clampdown has created widespread uncertainty. Many large mining operations have been forced offline — in some cases permanently and in others temporarily as they relocated from China to new sites. This migration no doubt came at a significant expense, and in the meantime, Bitcoin’s mining difficulty has undergone its biggest drop in history, only confirming the impact that the clampdown has had on the network.

However, lawmakers from other countries have also recently started to take a closer look at crypto. India, which only relaxed its stance toward cryptocurrencies in 2020, could once again be considering a ban, although the situation continues to evolve.

The United Kingdom Financial Conduct Authority also recently launched a campaign against Binance, ordering it to stop undertaking regulated activity in the country. Now, crypto firms are withdrawing licensing applications in the U.K., while users are finding themselves locked out of the exchange by their banks.

In general, Binance has been under regulatory pressure from all over the world, for a variety of reasons. In the meantime, it’s still not clear if regulators are going after Binance specifically or if the exchange is simply seen as a representative of the rest of the crypto industry.

Related: Binance in the crosshairs: Are regulators paying attention to crypto?

Institutional analysts have also been making ominous predictions about Bitcoin’s price, with JPMorgan issuing a warning that the near-term setup for BTC continues to look unstable. While these developments aren’t likely to be as seismic as the Chinese mining ban, they haven’t helped market confidence.

Daniele Bernardi, CEO of fintech management company Diaman Group, believes that there are reasons to be cautious, telling Cointelegraph:

“If we analyze the Bitcoin price based on the S2F model, Bitcoin prices have the potential to triple in the short term. However, at Diaman, we’ve also developed a model based on the rate of adoption. Following this model, a $64k ATH is fair.”

A stronger bull case?

As it has previously been suggested that most of the signals point to this bull market only being at a halfway point, is there enough evidence to reverse that direction? All things considered — and unsurprisingly — it’s too soon to say definitively. On one side, there is regulatory tumult and a substantial decrease in trading volume, suggesting an overall lack of interest and engagement. On the other, there are some telling on-chain metrics and indicators of investor sentiment that appear to stack up in favor of a continuing bull market.

Related: GBTC unlock edges closer as impact on Bitcoin price remains unclear

However, in practice, the regulatory issues continue to spook the market, proving that price models and VC funding aren’t necessarily able to assuage concerns. If there are further major clampdowns, then it may be that the bull market cannot recover after all.

The fact that prices have held above $30,000 thus far, despite perhaps the biggest test to mining security in history, is a testament to the bullish forces at play. If the current regulatory situation starts to calm, then there’s every chance that the bullish part of the market cycle could still play out to its predicted conclusion.

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Analysis

US senators tell athletes to avoid digital yuan, Chinese exchange volumes rebound … and more – Cointelegraph Magazine

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This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.  

Olympic battle

After months of writing about the relentless actions of the Chinese government, this week we lead with a story from the US Government. On July 19, three US senators signed a letter addressed to the to U.S. Olympic and Paralympic Committee, requesting US athletes not use the e-CNY in February’s Winter Olympic games in Beijing. The logic was that the digital currency would be traceable after the athletes returned to the US, in case China was interested in tracking foreign bi-athletes and bobsledders in their offseason training regiments. 

China’s Foreign Ministry spokesperson Zhao Lijian snapped back that the senators “should stop making troubles” and “figure out what a digital currency really is.” Zhao apparently believes that the US lawmakers might not be up-to-date on the latest in technology, something the crypto-enthusiasts on Twitter have been bemoaning for years. 

All sarcasm aside, this points to a growing trend of consumers being caught in geo-political struggles around technology, which could become a much larger issue as CBDCs become more prevalent. Users can choose to avoid certain hardware or apps that provide a data security risk, but avoiding the local currency will be a much more difficult choice to make. Cash use has dropped to a negligible amount in China, with the bulk of daily transactions being digital through Alipay and WeChat. Traveling or living in China without touching the digital currency will be a huge inconvenience, and one likely to not go over well with future generations.

Leading the pack

On July 19, Cointelegraph reported that Chinese Bitcoin miners had earned close to $7 billion dollars in the past year, ten times higher than miners in the second highest country, the US. This trend might be broken up slightly by the regulatory crackdown this year, but still shows the influence China has on the industry, especially if large Chinese companies can continue to set up operations in neighboring countries.

 

 

Axie Infinity’s token is taking off faster than the game in China (Source: Axie Infinity).

 

Chinese volumes bounce back

Volumes on Chinese exchanges Huobi and OKEx rebounded slightly compared to the same time last week, including on the derivatives side where the two exchanges made up around 44% of Binance’s volume, compared to only 38.7% at the same time the week before. Gaming token Axie Infinity remained a hot token for trading, and was the fourth-most traded token on Huobi on Thursday behind BTC, ETH, and DOGE. Actual gameplay hasn’t really taken off in China, and even though the site remains unblocked by the Great Firewall thus far, visits to the website are still scarce. Users from the Philippines make up 40% of website visitors, whereas China accounted for less than 3%. China boasts the largest gaming community in the world, but tight restrictions on cryptocurrencies is likely to limit the growth of public blockchain-based gaming for the time being. Speculating on gaming-related tokens, however, will likely remain a strong trend. 

It’s worth noting that in the short term, the regulations looming on the horizon makes betting on exchanges a risky proposition. Many rumors have swirled about upcoming action to be taken by Chinese regulators, particularly for repeat offenders in the area. Regulators in smaller countries seem to be waiting to see who will throw the first punch.  

Non-fungible fossils

Hong Kong’s most prominent newspaper South China Morning Post is launching an NFT platform aimed at historical news and items. This platform will let verified issuers mint and trade NFTs in an open marketplace. This should appeal to a broader audience of collectors and non-crypto native users in Southeast Asia, as well as a government interested in exporting soft power to the world. 

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Analysis

Bitcoin Crashes Below $30,000, Bear Market Or Bullish Setup?

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Bitcoin has finally crashed below $30,000 for the first time in a month after the digital asset had recovered above this point following the crash to the $28,000 range in the last month. Market volatility levels have continued to remain low while the digital asset price continues to suffer. Market sentiments seem to remain in the extreme fear range as investors hold off putting more money into digital assets.

Bitcoin continues to show bearish tendencies as, despite best efforts, bulls have not been able to drag the Coin

A coin is a unit of digital value. When describing cryptocurrencies, they are built using the bitcoin technology and have no other value unlike tokens which have the potential of software being built with them.

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” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin out of its three-month-long decline. Breaking the critical $30,000 hold that holders have tried to keep the digital asset price. Market indicators so far continue to show that the digital asset might be headed for further decline.

Related Reading | Retail Traders Pile On Shorts, Is This The Bitcoin Bottom?

The price of the digital asset has now hit the same price that the Coin

A coin is a unit of digital value. When describing cryptocurrencies, they are built using the bitcoin technology and have no other value unlike tokens which have the potential of software being built with them.

» Read more

” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin was at the beginning of the year 2021. Showing that this dip might be continuing on further down than the market anticipates.

Bitcoin Market Dominance Continues To Decline

Bitcoin is the first cryptocurrency and certainly the most valuable has always maintained market dominance over the other crypto assets in the market. The market dominance was well above 50% at the beginning of the year but now that number has declined to less than 50% market dominance for the Coin

A coin is a unit of digital value. When describing cryptocurrencies, they are built using the bitcoin technology and have no other value unlike tokens which have the potential of software being built with them.

» Read more

” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin.

Bitcoin market dominance at 42% | Source: BTC Dominance Index Chart from TradingView.com

The price crash in May saw the market dominance for the digital asset take a sharp decline as other crypto-assets started to step up their game and take more market share. With coins like Ethereum slowly but surely taking a much larger market share.

Related Reading | Bitcoin Might Already Be In A Bear Market, Investors Just Don’t Know It Yet

Bitcoin dominance saw sharp declines in 2017 when other crypto assets started gaining notoriety. In 2017 alone, the digital asset saw its market dominance go down from 95% to 52%, before recovering up to 70% as the last Bear

Bear market is defined as a decreasing set of prices for various types of assets. A bearish investor wants to profit from the movement of dropping prices. You can think of a bear, swinging his big paw downward on the investment, crushing prices.

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” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market raged on. But now, bitcoin has started losing much of that dominance, currently sitting at 46% market dominance.

Bear

Bear market is defined as a decreasing set of prices for various types of assets. A bearish investor wants to profit from the movement of dropping prices. You can think of a bear, swinging his big paw downward on the investment, crushing prices.

» Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>Bear Market More Likely Than Bullish Setup

Massive FUDs in the market might point more to a bearish trend than it does to the bullish setup. There have been debates about whether events like the China crackdown on mining and crypto bans have been a good indicator for the crypto market at large and consensus seems to be that the events will help to make digital assets even more valuable.

While things like this might be true in the long term, it seems so far to not be good for the long term. With the FUDs have come decreasing prices in the market and the charts continue to be in the red.

Bitcoin price crashes below $30,000 | Source: BTCUSD on TradingView.com

With investors still being wary of putting money in the market, the price has so far suffered. Despite institutions like Michael Saylor’s MicroStrategy continuing to be bullish on bitcoin.

Bitcoin is currently trading at $29,764, with an overall market cap of approximately $557 billion.

Featured image from Investment U, charts from TradingView.com

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Analysis

Bitcoin Bears Lose Strength, What Could Trigger A Decent Recovery

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Bitcoin price extended its decline below the $30,000 support against the US Dollar. BTC is finding bids near $29,250 and it might attempt an upside correction.

  • Bitcoin is following a bearish path and it broke the key $30,000 support zone.
  • The price is now trading well below $31,000 and the 100 hourly simple moving average.
  • There is a key bearish trend line forming with resistance near $31,300 on the hourly chart of the BTC/USD pair (data feed from Kraken).
  • The pair could start a decent upside correction if it remains stable above the $29,250 level.

Bitcoin Price Settles Below $30K

Bitcoin price extended its decline below the $30,200 and $30,000 support levels. BTC even settled well below the $30,000 level and the 100 hourly simple moving average to move further into a bearish zone.

The price even spiked below $29,500 and traded as low as $29,313. It seems like bitcoin is forming a support base above the $29,250 level. An initial resistance on the upside is near the $30,000 level. It is close to the 23.6% Fib retracement level of the recent downward move from the $31,900 swing high to $29,313 low.

The first major resistance is near the $30,600 level. It is near the 50% Fib retracement level of the recent downward move from the $31,900 swing high to $29,313 low.

Source: BTCUSD on TradingView.com

There is also a key bearish trend line forming with resistance near $31,300 on the hourly chart of the BTC/USD pair. In the short-term, bitcoin price might start a decent recovery above $30,000, but it might face barriers near the $31,000 level in the near term.

More Losses in BTC?

If bitcoin fails to recover above the $30,000 and $30,600 resistance levels, there is a risk of more losses. An initial support on the downside is near the $29,350 level.

The first major support is now near the $29,250 zone. A clear downside break below the recent low and $29,250 might call for a move below the $29,000 level. The next key support is seen near the $28,000 level.

Technical indicators:

Hourly MACD – The MACD is now losing pace in the bearish zone.

Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is rising and it might soon clear the 50 level.

Major Support Levels – $29,250, followed by $29,000.

Major Resistance Levels – $30,000, $30,600 and $31,000.

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