Cryptocurrencies may take time before the market bottoms out. How much longer to wait?
The crypto market is already in the “capitulation” phase – the period when the “weak hand” asset sales process is completed and, on top of that, a new global bottom is forming. According to analysts at the Glassnode platform, the capitulation began about a month ago, when Bitcoin collapsed into the $17,000 zone. That said, there are now some clear signals that suggest a global low is forming in this bearish trend. We tell you more about what’s going on.
The cryptocurrency market has remained relatively stable over the past 24 hours. That said, Bitcoin has fallen below the $20,000 mark and is still there. Changes in the rates of the top coins by market capitalization for the day looks like this.
Changes in cryptocurrency rates over the past 24 hours
Although Bitcoin is now 71.7 percent behind its high rate, a real market reversal is yet to come. That’s exactly the viewpoint held by analysts.
When cryptocurrencies will start to rise
Unfortunately, experts don’t yet see the potential for Bitcoin to rise quickly in the medium term, as it “takes some time” for a bearish trend to develop. Here’s a rejoinder from the analysts, in which they share their view of what’s happening.
In order for the bearish trend to reach its final bottom, the proportion of coins held at a loss by investors must go mainly to those who are least sensitive to Bitcoin price fluctuations and have the most conviction about subsequent growth.
In other words, experts point out that there are still investors in the niche who are not prepared to hold the coins in any market conditions. Accordingly, when the situation becomes completely unbearable, they will get rid of their savings - with those who have no doubts about the onset of a new bullrun and are already looking for money to buy "at a discount".
As Cointelegraph’s sources point out, the market “just needs” another round of declines to fully “test” the stamina of all traders and investors. Glassnode reached this conclusion based on data from previous bullruns. For example, in 2015 and 2018, long-term BTC holders accounted for more than 34 per cent of Bitcoin’s supply, which was at an unrealised loss.
Short-term holders of the coin, on the other hand, only accounted for 3 to 4 per cent. Consequently, there were virtually no so-called “market tourists” in the industry. Now, by the way, their share is also falling markedly.
Share of coins in unrealised losses among different market players
Currently, the second category of market players hold about 16.2 per cent of coins at a loss, while the first category holds 28.5 per cent. That is, it will take even more time for the coins to flow from the hands of those who mainly speculate on the value movements of cryptocurrencies to the hands of those who are willing to invest in crypto for the long term.
The dynamics of BTC sales by miners may also indicate that a bottom is approaching. For example, at the end of May, miners recorded sales of 7,900 BTC in a fairly short period of time. By today, their pace of getting rid of the cryptocurrency has slowed to 1,350 BTC per month, experts say.
Dynamics of BTC sales by miners
Incidentally, during the 2018-2019 “crypto-zima”, miners sold coins for about four months before the market found its global bottom. This year, sales started about a month ago, so market players at least from a historical perspective will have to wait some more.
Read also: Cryptocurrencies are promised stiff regulation as early as autumn. What are we talking about?
Overall, the bearish trend is hitting hard for both individual investors and large cryptocurrency companies, some of which have been forced to cut staff to streamline costs. The day before, rumours surfaced online that the KuCoin exchange was actively laying off its employees, but its CEO Johnny Lew denied the speculation.
KuCoin CEO Johnny Lew
What’s more, according to recent statements from KuCoin representatives, the company plans to expand by 300 employees in the near future, according to CryptoPotato. There are allegedly cuts indeed, but these are isolated cases that involve employees with worse productivity. KuCoin currently has a team of around 1,000 people.
Lew also denies any ties between the exchange and the infamous Terra project and crypto fund Three Arrows Capital, which recently began bankruptcy proceedings. According to him, KuCoin did not hold a significant position in Terra and was also not an investor in Three Arrows Capital.
KuCoin is ranked fifth by CoinMarketCap as an exchange
KuCoin’s success is confirmed by the exchange’s financial statistics. As indicated in its semiannual report, the company did not show a slowdown in its impressive growth amid market downturn, reaching a combined trading volume on the spot and futures above the $2 trillion mark.
The day before, The Block had looked at what was happening with the fees being charged by exchanges. It turned out that for investors with a monthly trading volume of 10 thousand dollars the most suitable exchange is Woo X, which we already know - it has the smallest commissions. The second place is FTX. The mentioned KuCoin is in the middle of the table, and the least fair commissions belong to Coinbase Pro. Here is the corresponding table.
Ranking of cryptocurrency exchanges by fees charged
We think the analysts' approach does appear to be correct. Obviously, when investors with no long-term interest in the coin niche get rid of their savings, there will essentially be very little else to sell crypto. This will lead to a stabilisation of rates, which will eventually end up with a new phase of increased interest in coins and the market as a whole. At least that's the way it used to happen in the past.
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