Crypto Market Update

Price for Bitcoin has been on a downtrend, which can mean we have entered a longer bearish period

Onchain data suggests BTC still has room to grow, once we see a trend reversal

Retail interest has dropped, but despite this most experts remain confident the bull market structure is still intact

Price Action

This past couple of weeks, the overall crypto market took a big hit, as $BTC dropped close to 21%, having gone as low as 41k$ and bouncing back to 49.5k$ almost immediately, before starting a grueling chopping dance that currently puts it at 46k$.

On the shorter time frames, this capitulation broke the uptrend line (white) that was set back in July, and that had supported BTC price before, while also failing to hold the 100-day SMA (blue) and even the 200-day SMA (yellow) as support.

Source: TradingView

On the longer timeframes, after a death cross on the weekly timeframe, BTC failed to hold the bullmarket support band, having closed the past 3 weeks below it and even braking below the 50-week SMA this last week. Historically, this indicator offered a great final stance against a more bearish trend.

Source: TradingView

So, on either timeframes, BTC seems to be on a bearish phase. The downtrend is undeniable, with lower highs and lower lows for the past month. Could this be the start of an extended bear market, or is it just a shake out and will be back on the uptrend shortly?

Onchain data suggests the latter

Onchain Data

For starters, the NUPL (Net Unrealized Profit/Loss) is far from the ranges where it usually indicates a market top. According to this indicator, there is still a good margin of growth, as it is on the same values as it was back in August, even if the price is 30% higher. Bitcoin has never experienced a prolonged bear market without having first reached the Euphoria range on the NUPL (blue area).

Source: Glassnode

Also, looking at the MVRV Z-score, an onchain indicator used to access BTC over/under valuation, we can see that we are far from the overvaluation zone. If we compare the current market trend for this indicator with the 2013 cycle, we can notice that we are following a similar path, although lower in scope and wider in time (which would support the extended cycle with diminishing returns theory)

Source: Glassnode

One way BTC could regain the bullish sentiment from a couple of weeks ago, would be to rise above the Support Band by the end of the current week. But this seems rather unlikely, given that it is currently also trading below the 50-week and 200-day SMAs.

Market Sentiment

Overall, the sentiment over on crypto mediums is bearish and fearful, as shown by some of the more commonly used metrics.

Source: Alternative

The fear and greed indicator, for example, is now at 25(extreme fear), and has been ranging below the 45 area (fear) for the past month

Source: Google Trends

The search trends for “Bitcoin” are also near the peak low for this cycle, with minimum interest on the subject by retail

Meanwhile, most traders are still convinced a sentiment shift might occur, even if not this December, early on in 2022.

Although his S2F model 100k$ prediction is most likely not panning out in 2021, PlanB still believes it might be validated later on.

Source: Twitter

Phillip Swift points out that, despite the short term ugly price action, the 1-year MA has not been broken, which could indicate we are still on a bull cycle

Source: Twitter

Benjamin Cohen, who is always bullish on Bitcoin on longer timeframes, thinks we are in for a long accumulation phase below the support band (51k$-53k$), before heading back up. According to Ben, “2021 has mostly been a sideways year”, and we may be looking into a much better 2022 in terms of percentage gains on Bitcoin investment. Nevertheless, he also notes that on the shorter timeframes, price action is bad and it needs to break out of this downtrend

Source: Twitter

Market participants have been clearly de-risking from their positions in the last couple of weeks. And although the trend seems to be down right now, onchain data shows, and crypto experts agree, that there may still be a rally coming next year.
This cycle seems to be behaving very differently than previous ones, which makes predicting what comes next both harder and exciting!

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