Grayscale estimates the crypto market cycle lasts an average of four years and predicts the current bear season to last about eight months.
The entire crypto market is currently experiencing a lift as the prices of Bitcoin and Ethereum surge upwards. However, the excitement may last only a short while. Grayscale predicts we may still be in for more carnage and a long way from euphoria in its latest insight into the digital asset space.
Current Crypto Winter Could Span Eight Months
Grayscale revealed that just like traditional economic and financial markets, the crypto market exists in a circle that ebbs and flows. The report estimates a crypto market cycle to last four years (1275 days) on average through the Realised price framework. Meanwhile, the same framework predicts that the current bear market could last eight months.
Essentially, Realised price is the sum of all assets at their purchase price or realised market capitalization, divided by the asset’s market capitalisation, which measures how many positions are in or out of profit. (Realised Price = Realised Market Cap / Current Supply)
Accordingly, Realised prices that are lower than market prices suggest that most assets are held above their purchase prices. Conversely, when above market price, it implies that most assets are retained below the purchase price. This framework helps determine when a bear market begins to transition to a new cycle.
Source: Grayscale Insight
Consequently, the report reveals that the 2020 crypto market cycle has lasted 1191 days as of July 12, 2022. The Realised Profit framework also points out that we may have officially entered a bear market on June 13, 2022. This is because Bitcoin’s Realised price crossed below the Market Price.
Therefore, going by previous market cycles, there could still be almost four months left before the Realised Price crosses back over the market price. Also, given that Bitcoin is more than 222 days off its all-time high, as seen above, the bear market may last for another 5–6 months.
Smart Money Enters The Market Indicates An Imminent Shift In Price Direction
On-chain data shows that there has been a massive spike in BTC’s large whale transactions for the month as the price reached $22,000. According to Santiment, the number of transactions involving Bitcoin worth more than $1 million reached its peak value. It likely indicates a possible change in trend for the market.
Furthermore, more on-chain data for Ethereum seems to back a change in market direction. According to IntoTheBlock, about 60% of ETH holders are currently in profit with strong support forming at $1,500, where there was significant buying. The data also suggests that the $1,600- $1,800 price level will also act as a significant resistance level in the short time.
Finally, data from Nansen shows that whales are bullish on the second largest crypto asset by market capitalization. It shows there has been significant accumulation over the past 30 days. This is further confirmed with large outflows of ETH leaving exchanges on the 7th and 15th of this month. About 604,400 and 435,700 ETH were withdrawn on both days, respectively.
Do you think there would be a likely change in price direction soon, or will the bear market continue for several months as predicted? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
