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

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It has now been three months since the price of Bitcoin peaked at an all time high of just under $ 65,000. For most of the past two months, Bitcoin (BTC) has traded in the $ 30,000 range of $ 40,000, up 54% below its peak

The slowdown came at a time when many analysts were predicting the exact opposite of a bull cycle that is expected to hit new highs in a matter of months, with some even speculating that a six-figure BTC price would materialize this year.

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

Bullish measures

Historical Bitcoin price activity has a convincing correlation with its halving cycles, with previous all-time highs being reached within 12 to 18 months of a halving. PlanB, the creator of the Stock-to-Flow BTC pricing model, is among the most vocal proponents of this. On Twitter, the analyst remains determined that the stock-flow cross-asset model (S2FX) predicts further bullish action, pointing to similar temporary lows ahead of epic rallies in previous cycles.

So far, the S2FX model has been one of Bitcoin’s most accurate price predictors over the years. Additionally, chain measures appear to support the theory that bearish sentiments may be short-lived. For example, shortly after the Bitcoin price spike in April, traders suddenly began to transfer funds to exchanges, ending an almost uninterrupted eight-month streak of HODLing.

Igneus Terrenus, head of communications at the crypto exchange Bybit, believes short-term traders were responsible for selling following BTC price peaks. He told Cointelegraph:

A series of deleveraging events has rocked many short-term speculators, whose capitulation accounts for the majority of losses in recent months. As the euphoria of the start of the year has all but dissipated, whales and long-term holders remained confident despite bearish market sentiment.

However, in the last few weeks, trading platforms have again seen funds pouring in. The HODL ratio achieved by Glassnodes, which tracks investors’ willingness to give up their holdings, also appears to reflect similar trends seen in previous cycles.

Richard Nie, chief research analyst at Bingbon, says the exchange flows are telling. Speaking to Cointelegraph, he agreed that the measurements indicate a bullish change. We need to be careful with the number of whale holders and the amount of BTC held by the exchanges, he said, adding that as more BTC is removed from the exchanges and moved to private addresses, there is is a strong bullish signal.

Mati Greenspan, Founder and CEO of Quantum Economics, told Cointelegraph: Right now, crypto volumes on exchanges are the lowest all year. Once trading resumes, that would be a good indication that the lull is over.

Wider bullish indicators

Project funding is another important indicator of market sentiment, and 2021 has been a bumper year for crypto startups. As Cointelegraph reported, the crypto industry saw more funding in the first quarter of 2021 than in 2020 as a whole, attracting $ 2.6 billion.

The slowdown since April does not appear to have spoiled the appetites of venture capitalists at all. At the end of May, the Circle stablecoin issuer raised $ 440 million, and a few days later, Mike Novogratzs Cryptology Asset Group announced that it was launching a crypto investment fund worth $ 100 million.

In mid-June, Bloomberg reported that the total crypto venture capital investment for the year was already over $ 17 billion. Even without taking into account the $ 10 billion that Block.one has spent on its new exchange business, this is enough to demonstrate that the performance of the crypto markets in the second quarter has not yet affected the growth of capital investment. -risk.

There are also macro market factors to consider. Amid the lingering 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 the case of Kiyosakis, he also encouraged his supporters to stock up on gold and Bitcoin. There are signs that Bitcoin could become more correlated with stocks, but could a massive sell-off of stocks mean that investors will eventually turn to BTC as a safe haven?

Another consideration is Bitcoin’s upcoming Taproot upgrade which is due to be activated in November. This is the first upgrade to the Bitcoin network since the Segregated Witness (SegWit) fork, which took place in August 2017. Of course, this was followed by an epic run to a new high of 20. $ 000 in December 2017. Its hard to know if history might repeat itself in this regard or if there is even a direct correlation between upgrades and markets, but it is worth considering.

Bear Shaped Regulators

There is no doubt that the biggest bearish forces that have shaped the markets in recent months have been regulatory. In particular, the Chinese government’s mining crackdown has created widespread uncertainty. Many large mining operations have been forced to go offline in some cases permanently and in others temporarily when moved from China to new locations. This migration has undoubtedly resulted in a significant expense, and in the meantime the difficulty of mining Bitcoins suffered its biggest drop in history, only confirming the impact the crackdown has had on the network.

However, lawmakers in other countries have also recently started to take a closer look at crypto. India, which only relaxed its stance on cryptocurrencies in 2020, may again consider a ban, although the situation continues to evolve.

The UK’s Financial Conduct Authority also recently launched a campaign against Binance, ordering it to cease all regulated activity in the country. Now, crypto firms are withdrawing license applications in the UK, while users find themselves barred from the exchange by their banks.

In general, Binance has come under regulatory pressure from around the world, for a variety of reasons. In the meantime, it’s still unclear whether regulators are specifically targeting Binance or whether 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 made worrying predictions on the price of Bitcoin, with JPMorgan issuing a warning that BTC’s short-term setup continues to appear volatile. While these developments are unlikely to be as seismic as the Chinese mining ban, they have not helped market confidence.

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

If we analyze the price of Bitcoin based on the S2F model, Bitcoin prices have the potential to triple in the short term. However, at Diaman, we have also developed a model based on the adoption rate. Under this model, an ATH of $ 64,000 is fair.

A stronger bull case?

As it has already been suggested that most of the signals indicate that this bull market is only halfway through, is there enough evidence to reverse this direction? All things considered and unsurprisingly, it is too early to say definitively. On the one hand, there is a regulatory uproar and a substantial decrease in the volume of transactions, suggesting a general lack of interest and commitment. On the flip side, there are telltale metrics and indicators of investor sentiment that seem to be building up in favor of a continued bull market.

Related: GBTC Unlocks Edges Closer As Bitcoin Price Impact Remains Uncertain

However, in practice, regulatory issues continue to frighten the market, proving that pricing models and venture capital funding are not necessarily able to allay concerns. If there are other major crackdowns, the bull market may not ultimately be able to recover.

The fact that prices have held above $ 30,000 so far, despite perhaps the biggest mine safety test in history, is a testament to the upward forces at play. calm down, then there is every chance that the bullish part of the market cycle may still continue to its intended conclusion.

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