Bitcoin’s worst performance period: Is the bottom in sight?

Bitcoin's worst performance period: Is the bottom in sight?

The Bear Market in Bitcoin: Is the Bottom In?

The ongoing bear market in Bitcoin has proven to be the longest in the network’s history, according to data from Glassnode. This winter season started on November 10, 2021, after prices reached an all-time high of over $69,000. As of July 18, 2023, BTC is trading at around the $30,000 level, experiencing a significant decline of almost 55% from its peak.

However, despite the crash and the persistence of bears in the market, recent developments suggest that the bottom might be in sight. To put this into perspective, it is worth noting that this is the second-largest phase in which Bitcoin’s prices have remained under water for such an extended period. The first instance occurred between 2015 and 2016, during the formative stages of the coin when its liquidity was building up. During that time, the coin remained depressed for 386 days. Another notable bear market period for BTC investors was between 2018 and 2019, when prices fell drastically from their 2017 peaks, crashing to as low as $4,000 during the crypto winter of 2018.

The extended bear run from 2021 can be attributed to several fundamental factors. One significant factor is the intervention of the U.S. Federal Reserve, which took measures to tame inflation by raising interest rates in eight consecutive sessions. This intervention had a considerable impact on Bitcoin’s price trajectory.

Additionally, fears surrounding the collapse of major crypto firms, such as 3AC, FTX, Voyager, and the spectacular depegging and crash of UST and LUNA, also contributed to the bear market. For instance, following the collapse of FTX in November, Bitcoin prices fell to an all-time low of $15,800 before gradually recovering and roughly doubling in the first half of 2023.

Despite the relatively low Bitcoin prices and the continuation of the bear market, the network’s hash rate remains at a near-all-time high. As of July 18, Bitcoin’s hash rate stood at over 385 EH/s, retracing from the all-time high of 465 EH/s recorded in late June 2021. The hash rate measures the processing power channeled to a proof-of-work network like Bitcoin. The higher the hash rate, the more secure the blockchain is against potential attackers. The fact that miners continue to invest in new gear and plug into the network during this bear market period demonstrates their confidence in Bitcoin’s long-term potential.

In a recent development, on July 16, reports indicated that the United States Securities and Exchange Commission (SEC) had accepted BlackRock’s application for a spot Bitcoin exchange-traded fund (ETF). This acceptance marks a significant milestone for the Bitcoin-related proposal and may strengthen prices if the regulator eventually approves the derivative, allowing institutions to have exposure to Bitcoin. BlackRock, as the world’s largest asset manager with over $9.4 trillion in assets, holds significant influence in the financial industry. Their application for a spot Bitcoin ETF demonstrates growing institutional interest in the cryptocurrency market.

However, despite these positive developments, Bitcoin’s price remains weak and is teetering close to the $30,000 mark. Bulls have been unable to push the price above $32,000, even with BlackRock’s reapplication of the spot Bitcoin ETF. It remains to be seen if the approval of an ETF marks the bottom for Bitcoin and the nascent asset class.

In conclusion, the current bear market in Bitcoin has been the longest in history, but signs indicate that the bottom may be near. Historical patterns and the resilience of the network’s hash rate suggest that Bitcoin has the potential to recover from this downturn. Additionally, the acceptance of BlackRock’s application for a spot Bitcoin ETF by the SEC indicates growing institutional interest and may contribute to price stabilization and future growth. However, it is important to closely monitor market trends and developments to gain a better understanding of the cryptocurrency landscape.

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