Has Bitcoin entered a bear market after falling 20% from its ATH?
Recently, bitcoin suffered a massive sell off, which caused the price of digital currency to drop more than 20% from the all-time high it reached earlier this month.
Following this drop, tech journalist Ryan Browne published an article on CNBC indicating that the cryptocurrency had entered a bear market.
“Bear markets are generally defined by a decline of 20% or more from recent highs,” his article said.
Browne was not alone, as Kate Rooney, another tech reporter at CNBC, declared on the same day that bitcoin’s 20% drop from its all-time high had “officially” placed the cryptocurrency into “bear market territory.”
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
It would seem that these journalists were relying on a traditional definition a bear market, which means a decrease of at least 20% from a recent high.
However, this definition does not work for bitcoin, according to several market experts who contributed to this article.
“Traditional definitions of bull and bear markets are incompatible with crypto price action,” said Amber Ghaddar, co-founder of the decentralized capital market. AllianceBloc.
“In crypto markets, declines of more than 20% occur frequently and are often part of a correction followed by a larger build-up. Throughout 2016 and 2017 we had six fixes over 30%, ”she noted.
Sylvia Jablonski, co-founder and director of investments for the ETF sponsor Defiance ETFs, proposed a similar take.
“Bitcoin has fallen 20% from its all-time high, which in the equity world correlates with a bear market. This, however, doesn’t really apply to bitcoin,” he said. she declared.
“Bitcoin and other cryptocurrencies (all 14,000 and up!),” Jablonski said.
Nick Mancini, Research Analyst at Crypto Sentiment Data Provider Negotiate the chain, also commented on the situation.
“To say that Bitcoin is in a bear market the second it declines by 20% is incorrect,” he said.
“Bitcoin is inherently volatile due to its limited supply (the available supply is far less than the total supply), lack of centralized authority, and its 24/7 international trading hours. These are new concepts that are not reproduced in the traditional financial sector, ”he noted.
The market watcher also spoke about the mindset of investors.
“Daily Bitcoin sentiment has now returned to the levels we saw before the Omicron news broke, according to our own data and the price is already back at nearly $ 59,000.”
“If this was a Bitcoin bear market, I would say it’s the shortest in history.”
The graph below illustrates the evolution of sentiment among market observers, monitored on a daily and hourly basis:
Defining a Bitcoin Bear Market
When it came to determining what exactly constitutes a bearish bitcoin market, market analysts were unable to reach a consensus.
“There is no rule of thumb because this asset class is too young and historical data is too scarce,” Ghaddar said.
“Looking at Bitcoin, we can expect to enter a bear market when the price change is greater than 20% and prices do not return within three months to the previous high.”
Mancini also offered his perspective on the matter.
“Bitcoin’s volatility creates difficulties in applying traditional methods of measuring long-term trend,” he said.
“Bitcoin is an asset that has on several occasions fallen over 70% from an all-time high and each time has risen to break all-time highs. ”
Jesse Proudman, co-founder and CEO of crypto robo-advisor Makara, sums up the situation well:
“A crypto bear market is like the offside rule in football – it’s hard to define, but you know it when you see it,” he said.
“We don’t think we’re in a bear market right now, and our outlook remains bullish at least until the end of the year.”
Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, EOS, and soil.