When we look at the previous bear cycles of the Bitcoin (BTC) price, we see two different accumulation phases. Examining this period gives an idea of how long the bear market will last. Our question in this article; It will be when the bear market for Bitcoin, SHIB and ETH will end.
Time-based capitulation versus price-based capitulation
A look at previous Bitcoin bear market cycles shows two different stages of capitulation:
- The first is a price-based capitulation through a series of sharp sell-offs and liquidations, as BTC has dropped between 70% and 90% below previous ATH levels.
- The second stage, and much less talked about, is capitulation, when the market finally starts to find the balance of supply and demand in a deep pit.
Let’s consider both of these stages with on-chain data and graphs.
Bitcoin price drops from the ATH level
At the time of writing, Bitcoin is trading 71.98% below its previous ATH level. Bitcoin’s past bear markets saw drops of 93.08%, 84.82% and 83.47%, respectively. While the size of this cycle dwarfs previous cycles, it is relatively nothing unusual for Bitcoin.
We see it as a classic price-based capitulation event when the average Bitcoin investor stays at a loss, despite the parabolic gains seen on longer timeframes.
time-based capitulation
The period in which an average investor falls below the average cost is defined as a time-based capitulation event. Because the average investor is at a loss, most leveraged shorts have sold their holdings. As the Bitcoin price falls and investments accept losses, the average cost basis falls. To contextualize this drop in Bitcoin’s “fair” value, the history of price drops that have taken place is shown below.
cryptocoin.com As we covered in our analysis, bear market cycles take time to emerge. They also vary in length depending on how you define them.
In any case, the blow of the biggest capitulation event in Bitcoin history has just occurred. More balance sheet contamination is definitely on the table. In addition, the macroeconomic environment is getting worse and worse. Investors aren’t just stuck in the midst of more severe market downturns. At the same time, lower prices and long sideways present a more painful market environment as cryptocurrencies are transferred from weak hands to strong hands and from impatient hands to strong hands.
Bitcoin and the redistribution of wealth
According to Glassnode, the vital feature of a long bear market is “the redistribution of wealth among the remaining stakeholders.” In essence, this means that investors who remain in a prolonged bear market are trading more and more. Glassnode noted that after the BTC price peaked at 6,000 from December 2017 to March 2019, a massive redistribution took place as the price dropped to the $3,000 and $4,000 range.
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