Are we in a bear market? Opinions vary, but it certainly feels like one. Markets across the board and across the world are in the red, and the bitcoin and crypto ones are no exception. If you\u2019ve been paying attention, you know how all of this happened, but a refresher course wouldn\u2019t hurt. Using ARK Invest\u2019s latest Bitcoin Monthly report as a guide, let\u2019s go through the tragic sequence of events and evaluate the bitcoin market as it stands.<\/p>\n
According to ARK, the road to the bear market went like this:\u00a0<\/p>\n
\u201cBeginning with the Terra collapse in early May, contagion spread to major crypto lenders including Blockfi, Celsius, Babel, Voyager, CoinFlex, contributing to the insolvency of the once highly-respected hedge fund, Three Arrows Capital (3AC). Since Terra\u2019s collapse, total crypto market capitalization has dropped ~$640 billion.\u201d<\/p>\n
Nevertheless, there seems to be a light at the end of the tunnel. \u201cPromisingly, however, recent fallout (Babel, Voyager, CoinFlex, Finblox) appears lower in magnitude compared to Terra, Celsius, and 3AC.\u201d That doesn\u2019t mean the end of the bear market is near, nor that capitulation is already over. Especially if the Mt. Gox victims receive the rumored 150K BTC.<\/p>\n
First, let\u2019s follow ARK as they analyze two of the main players in this drama. Then, let\u2019s check the stats of the bitcoin market to see if we can find signs and clues that point out to the end of the capitulation stage. SPOILER ALERT: The jury is still out on that one. Some signs point to an early end, others to further downside. Aren\u2019t bear markets fun?<\/p>\n
Celsius And The Death Spiral<\/p>\n
When Terra fell, the earth trembled. The Luna Foundation Guard sold nearly all of their 80K BTC reserve trying to defend the UST peg to the dollar. This event could\u2019ve been the catalyst for the bear market. The worst was yet to come, though. Several once-respected institutions were heavily exposed to Terra through its Anchor protocol, and the UST collapse sent them all into a still ongoing death spiral.\u00a0<\/p>\n
According to ARK, \u201cCelsius froze withdrawals on June 12th in response to significant outflows. Its DeFi debt outstanding is $631 million but the magnitude of its nonDeFi exposure is unclear.\u201d There was still hope for its clients, as the company paid several loans. However, Celsius filed for Chapter 11 bankruptcy, leaving them all high and dry.<\/p>\n
What really happens to the coins you deposit to reputable lending platforms. pic.twitter.com\/RQh7jfrrNZ<\/p>\n
\u2014 softsimon (@softsimon_) July 13, 2022<\/p>\n\n
The Chief Commercial Officer at Choise.com, Andrey Diyakonov, analyzed the situation for NewsBTC:<\/p>\n
\u201cTo put things into perspective, we need to turn it upside down, and ask, how much of the recent price action on the markets was influenced by or outright created by Celsius\u2019 actions? What goes around always comes around. It\u2019s so much more ironic given those credible reports that Celsius withdrawals were among those that sent UST and Terra position down the rabbit hole to find out where the bottom is.\u201d<\/p>\n
Our team covered that particular claim and the company\u2019s response.<\/p>\n
Three Arrows Capital And The Bear Market<\/p>\n
Then, there was \u201cThree Arrows Capital (3AC), a highly regarded crypto hedge fund reportedly managing $18 billion at its peak, appears to be insolvent after taking on too much leverage.\u201d That\u2019s according to ARK, who also says, \u201cSeemingly, 3AC took on excess leverage to try and recover the losses. Its creditors included major players in the industry like Genesis, BlockFi, Voyager, and FTX.\u201d<\/p>\n
All of those companies except FTX seem to be counting down to extinction.\u00a0<\/p>\n\n
BTC price chart for 07\/15\/2022 on Velocity | Source: BTC\/USD on TradingView.com
\nIs The Bear Market Just Beginning Or About To End?<\/p>\n
Is the bottom in? Opinions vary. In a section titled \u201cMarket Contagion Sets Bitcoin Into Capitulation,\u201d ARK analyzes all of the indicators and can\u2019t reach a final conclusion. The numbers are extremely interesting, though.<\/p>\n
\u201cDown 70% from its all-time high, bitcoin is trading at or below some of its most important levels: its 200-week moving average, the general cost basis of the market (realized price), the cost bases of long-term (LTH) and short-term holders (STH), and its 2017 peak.\u201d<\/p>\n
This \u201csuggests extremely oversold conditions,\u201d which is a great sign. However\u2026<\/p>\n
\u201cHistorically, global bottoms occur when the MVRV of short-term holders exceeds the MVRV of long-term holders. That condition has not been met, suggesting the potential for more downside.\u201d<\/p>\n
The \u201ccondition has not been met,\u201d but it\u2019s close. Very close.<\/p>\n
\u201cThis month, miners generated revenues only 45% of that for the last twelve months, breaching a threshold that usually correlates with market bottoms.\u201d<\/p>\n
Miners who didn\u2019t practice proper risk management have been selling at the present low levels. Miners who know what they\u2019re doing will keep holding until we come out of the bear market. The question is, how many companies are in the first group and haven\u2019t sold just yet?\u00a0<\/p>\n
\u201cNet realized losses in bitcoin recently reached a 2-year low, breaching 0.5% for only the fourth time since 2013.\u201d<\/p>\n
Historically, this suggests capitulation is over. Or is it?<\/p>\n
\u201cBitcoin\u2019s net unrealized loss has hit a 3-year low, highlighting that its current market value is nearly 17% lower than that of its aggregate cost basis. Historically, global bottoms have formed when losses hit 25%+.\u201d<\/p>\n
If we\u2019re going to reach 25%, that means there\u2019s still a long way to go.<\/p>\n
Is the bear market just beginning or about to end? The data is unclear. But capitulation seems to be nearing its end, which would be the first step in the right direction.<\/p>\n
Featured Image by Marc-Olivier Jodoin on Unsplash | Charts by TradingView<\/p>","protected":false},"excerpt":{"rendered":"
<\/p>\n
Are we in a bear market? Opinions vary, but it certainly feels like one. Markets across the board and across the world are in the red, and the bitcoin and crypto ones are no exception. If you\u2019ve been paying attention, you know how all of this happened, but a refresher course wouldn\u2019t hurt. Using ARK Invest\u2019s latest Bitcoin Monthly report as a guide, let\u2019s go through the tragic sequence of events and evaluate the bitcoin market as it stands.<\/p>\n
According to ARK, the road to the bear market went like this:\u00a0<\/p>\n
\u201cBeginning with the Terra collapse in early May, contagion spread to major crypto lenders including Blockfi, Celsius, Babel, Voyager, CoinFlex, contributing to the insolvency of the once highly-respected hedge fund, Three Arrows Capital (3AC). Since Terra\u2019s collapse, total crypto market capitalization has dropped ~$640 billion.\u201d<\/p>\n
Nevertheless, there seems to be a light at the end of the tunnel. \u201cPromisingly, however, recent fallout (Babel, Voyager, CoinFlex, Finblox) appears lower in magnitude compared to Terra, Celsius, and 3AC.\u201d That doesn\u2019t mean the end of the bear market is near, nor that capitulation is already over. Especially if the Mt. Gox victims receive the rumored 150K BTC.<\/p>\n
First, let\u2019s follow ARK as they analyze two of the main players in this drama. Then, let\u2019s check the stats of the bitcoin market to see if we can find signs and clues that point out to the end of the capitulation stage. SPOILER ALERT: The jury is still out on that one. Some signs point to an early end, others to further downside. Aren\u2019t bear markets fun?<\/p>\n
Celsius And The Death Spiral<\/p>\n
When Terra fell, the earth trembled. The Luna Foundation Guard sold nearly all of their 80K BTC reserve trying to defend the UST peg to the dollar. This event could\u2019ve been the catalyst for the bear market. The worst was yet to come, though. Several once-respected institutions were heavily exposed to Terra through its Anchor protocol, and the UST collapse sent them all into a still ongoing death spiral.\u00a0<\/p>\n
According to ARK, \u201cCelsius froze withdrawals on June 12th in response to significant outflows. Its DeFi debt outstanding is $631 million but the magnitude of its nonDeFi exposure is unclear.\u201d There was still hope for its clients, as the company paid several loans. However, Celsius filed for Chapter 11 bankruptcy, leaving them all high and dry.<\/p>\n
What really happens to the coins you deposit to reputable lending platforms. pic.twitter.com\/RQh7jfrrNZ<\/p>\n
\u2014 softsimon (@softsimon_) July 13, 2022<\/p>\n
The Chief Commercial Officer at Choise.com, Andrey Diyakonov, analyzed the situation for NewsBTC:<\/p>\n
\u201cTo put things into perspective, we need to turn it upside down, and ask, how much of the recent price action on the markets was influenced by or outright created by Celsius\u2019 actions? What goes around always comes around. It\u2019s so much more ironic given those credible reports that Celsius withdrawals were among those that sent UST and Terra position down the rabbit hole to find out where the bottom is.\u201d<\/p>\n
Our team covered that particular claim and the company\u2019s response.<\/p>\n
Three Arrows Capital And The Bear Market<\/p>\n
Then, there was \u201cThree Arrows Capital (3AC), a highly regarded crypto hedge fund reportedly managing $18 billion at its peak, appears to be insolvent after taking on too much leverage.\u201d That\u2019s according to ARK, who also says, \u201cSeemingly, 3AC took on excess leverage to try and recover the losses. Its creditors included major players in the industry like Genesis, BlockFi, Voyager, and FTX.\u201d<\/p>\n
All of those companies except FTX seem to be counting down to extinction.\u00a0<\/p>\n
BTC price chart for 07\/15\/2022 on Velocity | Source: BTC\/USD on TradingView.com
\nIs The Bear Market Just Beginning Or About To End?<\/p>\n
Is the bottom in? Opinions vary. In a section titled \u201cMarket Contagion Sets Bitcoin Into Capitulation,\u201d ARK analyzes all of the indicators and can\u2019t reach a final conclusion. The numbers are extremely interesting, though.<\/p>\n
\u201cDown 70% from its all-time high, bitcoin is trading at or below some of its most important levels: its 200-week moving average, the general cost basis of the market (realized price), the cost bases of long-term (LTH) and short-term holders (STH), and its 2017 peak.\u201d<\/p>\n
This \u201csuggests extremely oversold conditions,\u201d which is a great sign. However\u2026<\/p>\n
\u201cHistorically, global bottoms occur when the MVRV of short-term holders exceeds the MVRV of long-term holders. That condition has not been met, suggesting the potential for more downside.\u201d<\/p>\n
The \u201ccondition has not been met,\u201d but it\u2019s close. Very close.<\/p>\n
\u201cThis month, miners generated revenues only 45% of that for the last twelve months, breaching a threshold that usually correlates with market bottoms.\u201d<\/p>\n
Miners who didn\u2019t practice proper risk management have been selling at the present low levels. Miners who know what they\u2019re doing will keep holding until we come out of the bear market. The question is, how many companies are in the first group and haven\u2019t sold just yet?\u00a0<\/p>\n
\u201cNet realized losses in bitcoin recently reached a 2-year low, breaching 0.5% for only the fourth time since 2013.\u201d<\/p>\n
Historically, this suggests capitulation is over. Or is it?<\/p>\n
\u201cBitcoin\u2019s net unrealized loss has hit a 3-year low, highlighting that its current market value is nearly 17% lower than that of its aggregate cost basis. Historically, global bottoms have formed when losses hit 25%+.\u201d<\/p>\n
If we\u2019re going to reach 25%, that means there\u2019s still a long way to go.<\/p>\n
Is the bear market just beginning or about to end? The data is unclear. But capitulation seems to be nearing its end, which would be the first step in the right direction.<\/p>\n
Featured Image by Marc-Olivier Jodoin on Unsplash | Charts by TradingView<\/p>\n
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