Massive exchange-traded fund (ETF) outflows, declining spot demand from institutional investors and individuals, and increasing selling pressure from whale activity have investors wondering if cryptocurrencies are in a bear market.
Bitcoin It fell below $95,000 on Friday morning, down 8% on the day and more than 24% from its record peak of $126,200 just five weeks ago, according to CoinGecko data. More than $1.24 billion of long cryptocurrencies were liquidated in the past 24 hours amid the market downturn, according to data from CoinGlass.
The decline was not limited to the crypto market but was felt across stocks, with the S&P 500 index down nearly 1% in pre-market trading and gold down 2.76% today.
The lead cryptocurrency is down more than 10% from Monday’s high and is on an upward trajectory for the third consecutive week based on candlestick closing prices.
This bearish sentiment is reflected in a drop in investor confidence, as seen on prediction market Myriad, where users now see a 46% chance that Bitcoin will hit $115,000 before $85,000, down from 71% just four days ago. (Disclaimer: Myriad is the owner of decryption parent company Dastan).
definition of recession
“Judging by the way the market has behaved over the past three months, I have to conclude that we are now in a bear market,” said Adam Chew, principal researcher at options analysis platform GreeksLive. decryption.
Chu added that despite the significant divergence in investor sentiment this week, “put options are gaining ground today with Bitcoin below $100,000.”
“CryptoQuant’s bullish score brightens bear market territory. Eight out of 10 major on-chain indicators are bearish,” said CryptoQuant certified analyst Maarten Regterschot. decryption. “From declining stablecoin liquidity to declining network activity and derivatives outflows, this setup mirrors the late 2021-early 2022 cycle.”
In the perpetual market, open interest, which tracks total open positions, has steadily increased since the October 10 liquidation event that wiped out $19 billion in positions, suggesting increased speculative activity. Meanwhile, the cumulative volume delta, which is the difference between the sum of buys and sells, has been steadily decreasing, suggesting that sellers are in control.
According to Velo’s data, these two indicators combined show that short sellers dominate the perpetual market.
Coinbase’s premium, which tracks differentials and capital movements between the U.S. and global crypto markets, has fallen into negative territory, indicating that demand from the U.S. is fading, further strengthening bearish sentiment.
The final factor is reduced institutional demand due to macro and geopolitical uncertainty, as evidenced by outflows from exchange-traded funds (ETFs) and a slowdown in treasury-driven accumulation of digital assets.
Although geopolitical and macroeconomic uncertainties have subsided, the overhang persists, with traders “focusing on the damage that has already been done,” including weeks of missing economic data, experts previously said. decryption.
What’s next for Bitcoin?
Overall, the outlook for the cryptocurrency market remains bleak, making this one of the worst Q4 results.
Bitcoin’s continued decline from its all-time high of $126,000 to below $96,000 facilitated the formation of a “death cross.” This is a popular bearish signal that occurs when the 50-day simple moving average falls below the 200-day simple moving average, indicating that short-term momentum is declining faster than long-term momentum. This signal is, or is thought to be, the beginning of a bear market.
“The important thing is not to judge up or down, but to recognize that cryptocurrencies are moving from an overheated environment to a more cautious one,” said Shivam Thakral, CEO of Indian cryptocurrency exchange BuyUCoin. decryption.
“We are in a correction phase within a broader cycle,” Thakral added, noting that several key catalysts will determine whether this correction turns into a full-blown bear market, including economic data, regulatory developments, and the on-chain strength of Bitcoin itself.
