How does an ‘extremely fearful’ bitcoin market compare to the past and what to expect next?

Stablecoin USDTerra or UST USTUSD,
Once among the top 10 cryptocurrencies by market capitalization, it lost a 1-to-1 peg against the US dollar and fell as low as 6 cents on Friday, according to data from CoinDesk. LUNA LUNAUSD,
Another cryptocurrency backing the UST, its market cap has shrunk by more than $40 billion since the beginning of April, while it fell to almost zero from above $80 in early May.

In a note Friday, crypto trading firm QCP Capital cites “the biggest event of wealth destruction in the short history of the crypto markets” since Bitcoin was created in 2019.

Explanation: UST, why is LUNA crashing? The collapse of the $ 40 billion cryptocurrency announced

By the way, bitcoin BTCUSD
It dropped to $25,402 on Thursday, its lowest level since December 2020, and surged to nearly $30,000 on Friday, according to data from CoinDesk. The Bitcoin fear and greed index is currently sitting at one of its lowest points. indicates extreme fear.

USDTUSD Connector,
The largest stablecoin fell briefly as low as 96 cents against the dollar on Thursday before rising to $1.

more than that 400 billion dollars According to CoinGecko, it has been deleted from the crypto market in the past seven days. According to Messari analysts, Web 3-related cryptocurrencies, which are called the next generation of the internet, recorded the biggest loss with an average of 41%, with all sectors in the crypto space seeing double-digit losses during this period.

An industry participant said a series of events could herald the start of another “crypto winter.” This week’s topic on Twitter.

Some are more optimistic. “It’s a pattern. Looking back at what happened in 2014, there was an accident and there was a huge panic. People say, oh, crypto is dead. It’s not coming back. Mike Belshe, founder and CEO of crypto infrastructure provider BitGo, told MarketWatch in an interview. Of course he’s back.

Of course, while the crypto market remains volatile with high risks, the industry is still new and lightly regulated.

Bitcoin drop

Bitcoin, which hit Thursday’s low of $25,402, is down 63% from an all-time high of $68,990 in November. The percentage of decline is larger than the 54% drop in the highest cycle in July 2021, but smaller than in other bear markets.

The chart below shows bitcoin’s decline before each cycle high.

glass knot

According to Glassnode data, in March 2020 bitcoin dropped as much as 77% from its cycle high. According to Glassnode data, in the January 2015 and December 2018 month markets, bitcoin capitulated from local highs to lows of 85.5% and 83.8%, respectively.

Market under Part?

Some have said that bitcoin is approaching a “generational cyclical base.”

Bitcoin’s Thursday low is close to its realized price, close to the total cost base of on-chain investors, which is currently $24,000, insight analyst Will Clemente at bitcoin mining company Blockware Solutions said in a note Friday. “Any price below the actual price should be viewed as overvalued,” Clemente wrote.

Clemente told MarketWatch in a recent interview that historically, when the price of bitcoin approaches the realized price, it shows a buying opportunity.

Clemente said it’s also worth watching for Bitcoin’s 200-week moving average price, which often marks a cyclical bottom. It currently stands at just over $21,500.

Still, great uncertainty remains in the financial markets, as evidenced by the price movements in stocks.

To read: Despite the bounce, the S&P 500 remains dangerously close to a bear market. Here is the number that matters

“I think this is just the beginning of an ongoing decline in crypto,” Jay Hatfield, chief investment officer at Infrastructure Capital Management, told MarketWatch in a recent interview.

Hatfield attributed Bitcoin’s high returns in 2020 and 2021 in part to the Federal Reserve’s quantitative easing policy. “We experienced an unprecedented increase in Fed liquidity by purchasing $120 billion in securities per month. And now we’re going to move into an uneven drop in liquidity of $95 billion a month,” said Hatfield.

“The Fed hasn’t even started quantitative tightening. They just said they were going,” said Hatfield.

Hatfield predicted that Bitcoin could drop to $20,000 by the end of this year, and said that in the worst-case scenario, it could return to its pre-pandemic level of around $10,000. “I don’t anticipate getting there, but $10,000 would be a reasonable target,” Hatfield said. Hatfield compares bitcoin to Cathie Wood’s flagship Ark Innovation ETF ARKK,
It’s down more than 70% from its peak in March 2020 and is about the same level.

To read: Ark’s flagship fund is down 76% from its peak, while Cathie Wood sees its shares as still residing in the ‘deep value zone’.

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