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How does this bitcoin bear market compare to previous years?

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Key facts:
  • CryptoCompare evaluates aspects such as volatility and even the duration of each bear cycle.

  • BTC has succumbed more to external effects and traditional markets this year.

Although the price of bitcoin (BTC) has fallen more than 60 percent this year and the decline is even more than 70 percent from the cryptocurrency’s all-time high (November 2021), there is still room for further decline. This is what analyst firm CryptoCompare explains in a recent market report, in which it analyzes this year’s downward trend and compares it to previous cycles.

The report, published this weekend, states that, analysts state. that a further downturn could occur due to worsening macroeconomic conditions around the world. These conditions, they argue, could continue to impact risky assets, such as BTC.

In addition to these external conditions is the comparison of this negative cryptocurrency cycle with the previous two. And in this comparison, the outlook is also not very promising. “The bearish cycles of 2013 and 2017 affecting digital assets suggest that we may yet see further decline,” CryptoCompare writes.

The researchers support, on the one hand, the fact that in both of the above. the price of the cryptocurrency has fallen by more than 80 percent in both precedents.. Moreover, these two periods lasted longer than the current bear cycle, 364 and 407 days respectively. At the end of October, there were 357 days of this bear market, so just this Monday, November 7, is equaling the time of the 2017 cycle, with 364 days.

The previous bearish cycles had been 364 and 407 days, respectively. Source: CryptoCompare.

The decline was not as sharp as that of 2013 and 2017 in terms of time and severity, which could leave room for 2022 to become the worst decline in bitcoin’s history. Of course, it is important to keep in mind that past cycles and events do not reflect current cycles, and there are inherent limitations in making such comparisons.

CryptoCompare.

More stability, but greater dependence on traditional markets

As time goes on, the cryptocurrency market (with bitcoin leading the way) is maturing. This seems to be reflected in the decrease in volatility that BTC has shown this year, in the midst of this bear market.

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However, the report points to another possible explanation for this behavior: “while this may suggest that cryptocurrencies are maturing as an asset class, such patterns often precede a sharp increase in volatility.” In other words, not only might this not be a sign of maturity, but it could also be that It could be a warning point for the return of price volatility to the market..

The other aspect that may not give optimism reinforces something we discussed earlier: the macroeconomic environment. The global crisis has hit the markets hard. And on this occasion, with bitcoin more related with traditional assets such as the S&P 500 index, we have observed very similar behavior between the two. And if the crisis worsens, we expect both markets to do so as well.

In past bear markets, bitcoin has shown negative correlations with traditional asset classes, such as gold and stocks, as there seemed to be a complete disconnect between cryptocurrencies and traditional finance. However, the particular importance of macroeconomic activity for risk assets has led to an increase in BTC’s correlation with these assets in recent months.

CryptoCompare Report.

Bitcoin had a higher correlation with traditional markets this year. Source: CryptoCompare.

Positive investment behavior

Not everything is negative, despite the image above. And there is one behavior that seems to have particularly caught the researchers’ attention for this comparative report: what do the investors.

Unlike the last bear market, in which portfolio holders of different sizes sold in panic, in this bear market we have seen steady accumulation in almost all accounts.

CryptoCompare analysts.

As we reported in CryptoNews, the trend this year has been one of accumulation rather than sale.. Those selling are mainly speculators, but savers Long-term savers have not disposed of their funds in BTC.

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