Current Bear Market is Worst Ever Recorded, Report Shows

Key Insights:

• The first sign of a bear market is the decline in Bitcoin price below its 200-day moving average.
• Bitcoin is trading at less than half of the 200-day moving average level.
• Only 13.9% of all Bitcoin trading days have seen spot prices below unrealized prices.

In case you’ve been living under a rock, the crypto market collapsed in May, erasing more than $2 trillion in value. In a week, Terra went from being valued at more than $50 billion to collapsing into a state of disrepair.

As Terra collapsed, wiping out nearly $40 billion in investors’ capital, so too did other cryptocurrencies. When the algorithmic stablecoin UST lost its peg to the U.S. dollar and the price of LUNA dropped 98%, it fuelled a slump across cryptocurrencies. The result was a market capitalization that fell below $1 trillion for the first time since January 2021.

While cryptocurrencies have a track record of boom and bust cycles, owing to their volatility, a new report by blockchain analysis firm Glassnode shows that the current crypto bear market is the worst ever recorded.

More specifically, on-chain analysis highlights how Bitcoin’s (BTC) combined current dip below the 200-day moving average (MA), negative deviation from realized price and net realized losses makes 2022, unequivocally, the worst in BTC’s history.

The Severity of Current Market Conditions

The most obvious indication of a bear market is when the spot price of Bitcoin falls below the 200-day MA or worse, the 200-week MA.

Glassnode highlighted how rare the current price levels are, especially since falling below the 0.5 Mayer Multiple (MM) is a unique occurrence that hasn’t happened since 2015.

The report found that only 84 out of 4160 trading days (2%) have recorded a closing MM value below 0.5. The MM factors in price changes above and below the 200-day MA to indicate overbought or oversold conditions.

Ethereum (ETH) is trading at a 63% discount to its 200-day MA, and its Mayer Multiple has hit 0.37, below the 0.6 MM band downside deviation.

A Capitulation Event

When the spot price falls below the realized price, it can lead to traders increasingly selling their coins at a loss. Notably, Glassnode did express that such a cascade effect is typical of bear markets and market capitulations.

However, instances when spot prices trade below the realized price are rare, since this is only the third time it has happened in the last six years and the fifth time it’s happened since 2009.

Put into perspective, only 13.9% of all Bitcoin trading days have seen spot prices below unrealized prices.

To make matters worse, investors are locking in their losses on Bitcoin. For example, when Bitcoin fell below the $20,000 mark on June 18, investors collectively locked in a loss of -$4.234 billion in a single day, which is a 22.5% increase from the previous record of $3.457 billion set in 2021.

Overall, this means that the market is, lamentably, in the midst of a capitulation event. As well as investors selling their Bitcoin holdings at a discount due to the the financial pressures of limited liquidity and rising inflation, miners have also started selling their stacks too – which is another indicator that capitulation has taken place.

BTC is down 69% from its all-time high of $69,044 set in November 2021 and is currently trading at around $20,000.