According to a recent report by Glassnode, the bear market of 2022 proved to be the most important one yet for the cryptocurrency.
While equities and bonds have also struggled so far this year, 2022 has historically been challenging for digital assets, according to a report by a blockchain analysis firm. The report begins, “It could be argued that 2022 is the most significant bear market in the history of digital assets.” From a peak of over $3 trillion in November last year, the cryptocurrency market has liquidated by trillions and is currently struggling below $1 trillion in total market capitalization.
The ever-tightening economic conditions, such as rising inflation and rising interest rates, have put immense pressure on the “highly-leveraged crypto ecosystem”, the report said. Highly leveraged funds have also become increasingly attractive targets for liquidators who want to capitalize on them. The report also highlights “the revaluation of incoming collateral both on-chain and off-chain”.
The most important indicator that this bear market differentiates itself from others is that both Bitcoin and Ethereum have now also traded below their previous cycle ATH for the first time. This has subsequently put a significant portion of the market at unrealistic losses, with all 2021-22 investors, for example, now underwater.
The report details bitcoin’s current decline below the 200-day moving average (MA). According to Glassnode analysis, negative divergence from real value and net real loss has made 2022 the worst in the history of bitcoin.
It was also determined along with another metric using the 200D MA, the Meyer Multiple (MM), which records price divergence up and down to indicate overbought or oversold conditions, respectively. According to the results of the report from the blockchain analysis firm, “for the first time in history, the 2021-22 cycle has recorded a lower MM value (0.487) than the previous cycle’s low (0.511).
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