Bitcoin bear market enters 'deepest and darkest' phase

NEW YORK • The bear market for Bitcoin has entered its "deepest and darkest" phase, with even long-term holders who had toughed it out until now coming under extreme pressure.

That is according to strategists at Glassnode, which tracks an indicator known as realised price, the average purchase price of all Bitcoins in circulation.

The cryptocurrency is currently trading roughly US$1,000 (S$1,390) below the coin's current realised price of US$23,430, according to the firm. Bitcoin dropped as much as 5.2 per cent to US$20,833 early yesterday in London.

"The current bear market is now entering a phase aligned with the deepest and darkest phases of previous bears," the strategists wrote in a note. "The market, on average, is barely above its cost basis, and even long-term holders are now being purged from the holder base."

Market watchers have become preoccupied with figuring out which cohorts of investors are getting hurt the most during the current crypto winter. With Bitcoin now hovering around December 2020 lows, many newer entrants are now underwater.

Meanwhile, UBS strategists are monitoring Bitcoin miners - whose businesses have been under pressure due to high energy costs and capital expenditure commitments - for potential signs of capitulation, which could also have an impact on prices.

Bitcoin's slump is already having ramifications for other companies exposed to the crypto market.

On Tuesday, cryptocurrency exchange Coinbase Global said it would slash 18 per cent of its workforce, or about 1,100 jobs, as part of efforts to rein in costs amid volatile market conditions. Crypto lending platform BlockFi said on Monday it would lower headcount by about 20 per cent, while Singapore-based crypto exchange Crypto.com said last Friday it would axe about 260 employees, or 5 per cent, of its workforce.

Digital-asset investors have been partially spooked by crypto lender Celsius Network pausing withdrawals, swaps and transfers, though the broader market remains under duress after a key inflation print came in hotter than expected last week, meaning that the United States Federal Reserve will have to be aggressive in its attempts to cool rising prices.

RBC Markets' head of US Equity Strategy Lori Calvasina said she would like to see Bitcoin stabilise. "It has become another helpful indicator of sentiment and risk assets generally," she said on a podcast.

Meanwhile, Glassnode strategists said that a change in the net position of hodlers - the staunchest investors who refuse to sell - can be used to estimate the magnitude of coin volume they are accumulating or distributing. That reading suggests that approximately 15,000-20,000 Bitcoins per month are transitioning into the hands of hodlers, a decline of 64 per cent since early May, an indication of weakening accumulation.

Bitcoin has fallen more than 30 per cent this month. Its decline yesterday marks its ninth straight day of losses, with the rate of change over the past three days at 24 per cent - the starkest drop in its history. "Bitcoin trades like a penny stock," said Nuveen chief investment strategist Brian Nick. "There are all kinds of reasons to think that once it starts falling quickly, it can continue to fall. If it can move 20 per cent in two days, it can move another 20 per cent the next two days."

BLOOMBERG, REUTERS