Hopes for a recovery in the broader crypto market were shattered after Bitcoin plunged to its all-time lowest level since December 2020. The latest slump suggests a deeper bear market that could last for weeks or months.
Analysts pointed out that long-term holders (LTHs) are regarded as savvy Bitcoin accumulators having amassed their coins early in bull trends at cheaper prices or at a lower cost basis. The holders, when selling or spending their BTC, typically sell it at a lower average cost basis than their short-term peers. However, the latest price crash has flipped the script. LTHs are spending their coins on a higher cost basis than short-term holders (STHs). And this has dashed hopes of a quick rebound for Bitcoin. It coincides with deep bear market finales. The previous one lasted between 52-days in 2020 and 514-days in 2014-2015. According to a Glassnode report, it was accompanied by additional drawdowns in the price of -40% to -65%.
LTHs have now realized significant losses. Their conviction to buy the dips has been shaken. Glassnode stated that around 15,000 – 20,000 Bitcoin per month are transitioning into the hands of Bitcoin HODLers. This is a decline by 64% since early May – highlighting a weakening accumulation response. Moreover, analysts believe the current bear market is entering a phase-aligned with the deepest and darkest phases of previous bears.
At the time of writing this article, Bitcoin was down at $21,890. It has lost 15.53% of its value in the last 24-hours, as per data from CoinMarketCap. Ethereum has also dived to new lows of $1,154. Ether is down by 15.72%. The top two cryptocurrencies sudden deep dip sounded an alarm in the crypto market. This could be attributed to the “crypto winter” wherein crypto firms are also laying off employees.