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On-chain metrics point to early stage bear market, but Bitcoin HODLers seem unfazed

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Bitcoin, the largest cryptocurrency recently gathered some strength to push outside the resistance zone. At press time, BTC surged more than 4% to reach the $37.7k mark. This might sound decent however, the king coin suffered major blow from its previous ATH, $64k last year. Indicators still signal at a bearish trend concerning BTC.

Fear and Greed index, at the time of writing stood at 23, signalling ‘Extreme fear’. According to famed crypto trader/ analyst, Rekt Capital‘s poll on Twitter, more than 50% supported the aforementioned narrative.

There’s more

Glassnode, a leading on-chain metric analysis platform published their latest “The Week On-Chain” newsletter to highlight this possible bearish trend.

It established the “likelihood that a prolonged bear market is in play” by “using historical investor behavior, and profitability patterns” as guide. One thing’s for sure, the recent crash was severe, and “such a heavy drawdown is likely to change investor perceptions and sentiment at a macro scale,” the report added.

How severe?

Well, According to Glassnode, the said crash was “the second worst sell-off since the 2018-20 bear market, eclipsed only by July 2021, where the market fell -54% from the highs set in April.”

Apart from the price, investors “capitulated over $2.5 Billion in net realized value” on-chain this week. Who were those paper hand investors? Well, the lion’s share of these losses were attributed to ‘Short-Term Holders.’

Here are a few indicators

Bitcoin’s NUPL was currently at 0.361 which indicates that an equivalent to 36.17% of the Bitcoin market cap was held as an un-realised profit. The lowest level of network profitability (since July 2021) hinted at an ‘early bear’ phase.

This came in stark contrast to the much higher profitability values of ~0.75 set in March, and ~0.68 set in October last year. Even though the difference was sustained, the said metric at least commenced an optimistic route (yellow).

How does this point to a bear market?

“Considering previous cycles, such low profitability is typical in the early to mid phase of a bear market (orange). One could also reasonably argue that a bear market started in May 2021 based on this observation.”

At the time of writing, the MVRV Z-Score stood at 1.004. As per Glassnode, the market was within territory visited in bearish markets. A bearish divergence was pictured similar to the NUPL metric above.

According to Glassnode,

“The bulls either need to step up in a big way, else the probabilities favor the bears. That said, a relief bounce in the near term is also probable if history is to act as a guide.”

In the chart above, the market was trading below the RTLR price of $39.2k, but above the Realized price of $24.2k. Again, this was often observed during early to mid stage bear markets.

Dumping session

There’s no surprise here. The Bitcoin market witnessed heavy losses. The Net Realised Profit/Loss metric proved this narrative.

“As the market traded down to the weekly lows on Saturday, over $2.5 Billion in net losses were realised, with investors spending coins held at a loss. This marks the largest capitulation event of this drawdown, and almost matches the $2.61 Billion net loss from May 2021.”

The graph below highlighted the same concern.

Needless to say, Long-Term Holders (LTHs) appeared unfazed by such a severe drawdown. Overall, the Bitcoin cycle might be dead. Or maybe we’re just in a bear market as Glassnode metrics seem to suggest. Either way, it is quite clear that LTHs are not selling and that may bring about positive action in the future.

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Shubham is a full-time journalist at AMBCrypto. A Master's graduate in Accounting and Finance, Shubham's writings mainly focus on crypto-regulations across the United States and Europe. Also, a die-hard Chelsea fan #KTBFFH.

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