Bitcoin’s recent performance has sparked a heated debate among analysts regarding the potential onset of a bear market. Since last Friday, Bitcoin has been trading below its 365-day moving average of $102,000, a trend that has coincided with a dramatic decline in market sentiment as evidenced by the Fear & Greed Index, which plummeted to a level of 10—signifying intense fear reminiscent of the panic-filled months earlier in 2022.
The cryptocurrency market has suffered significant losses recently, with over $700 billion evaporating over the past month. Mixed signals from macro economic trends and whale activity have led to divergent opinions on Bitcoin’s immediate future, particularly in light of recent technical breakdowns.
Last week marked a notable decline for Bitcoin, as it fell below the $100,000 threshold for the second time within a week, leading analysts to express increasing concern. Trading below the 365-day moving average is a critical indicator often viewed as a sign of regime changes, based on historical patterns observed during the 2018 and 2021 bear markets. On-chain analytics reveal that Bitcoin is also trading below the realized price level for coins held for 6 to 12 months, currently at around $94,600. This price point, considered to be the breakeven point for “bull-cycle conviction buyers,” raises alarm since persistent lower prices could lead many investors to incur losses, potentially increasing selling pressure on the market.
The market dynamics have shifted dramatically, with Bitcoin perpetual futures experiencing their most significant weekly jump in open interest since April, surpassing $3.3 billion. Traders had initially placed limit orders to capitalize on the dip when Bitcoin fell below $98,000. However, as prices continued to decrease, these orders were triggered, resulting in leveraged exposure during a downtrend.
Veteran trader Peter Brandt has provided a sobering analysis, highlighting a substantial downward reversal pattern noted on November 11, which was followed by eight days of lower highs. He has set bearish target projections at $81,000 and $58,000, questioning whether the current movement qualifies as a bear market. Brandt’s sentiments echo the feeling among some that purchasers at $58,000 may later regret their decisions should prices rebound to $60,000.
Conversely, not all analysts agree that the current conditions confirm a full-scale bear market. Some have proposed viewing the situation as a “mid-cycle breakdown,” a precarious phase that necessitates further signals before a definitive trend can be established. Key triggers to confirm a bear market would include Bitcoin remaining below the 365-day moving average for an extended period, significant selling by long-term holders, and negative trends in the overall market’s Moving Average Convergence Divergence (MACD).
While market sentiment appears pessimistic, on-chain data indicates a notable uptick in Bitcoin whale accumulation. Addresses holding at least 1,000 BTC have increased in number despite the falling prices, signaling that institutional investors and major players may be treating the downturn as a buying opportunity rather than a signal of a prolonged bear market.
Amidst the prevailing fears, macroeconomic factors also come into play. Global liquidity levels are at a historic high, with over 80% of central banks currently easing their monetary policies. This trend is generally favorable for riskier assets, including cryptocurrencies. Central banks reducing interest rates and injecting liquidity into the economy could bolster the market, as illustrated by the recent year-on-year growth in global credit.
Historical patterns suggest that increases in liquidity often lead to rallies in risk assets, including cryptocurrencies that function as frontier assets. Current conditions bear similarities to pre-bull markets, where brief corrections occurred as the money supply expanded. Unless the prevailing liquidity trend changes—an unlikely scenario given current central bank rhetoric—cryptocurrencies could remain structurally supported.
However, caution is warranted as the International Monetary Fund’s recent report flagged concerning valuations in technology assets. Additionally, the Organisation for Economic Co-operation and Development has projected that global GDP growth will decelerate to 2.9% in the upcoming year—down from 3.3% in 2024. These economic forecasts could temper the extent to which liquidity may positively impact asset prices, creating a delicate balancing act for analysts as they weigh abundant liquidity against looming economic challenges in today’s market.
