why are crypto prices down

The crypto market bottom is ‘almost in’ — Market Talks chats with trader Korean Jew Crypto

November 3, 2022 Coin Telegraph

Market Talks discussed the Bitcoin bottom, DOGE’s price action and signs to follow in order to know when it’s time to ape into crypto.

On this week’s episode of Market Talks, we welcome Jake, also known as “Korean Jew Crypto” on Twitter and the founder of “The Trading Dojo,” a platform that provides quality coaching and education to help traders identify profitable trades on their own.

The wide reaching interview covered KJ’s take on how to trade the Federal Open Markets Committee and Consumer Price Index events, along with his views on how Federal Reserve policy is impacting crypto prices.

According to KJ:

“In regards to what Powell said, and the way the news cycle has been, a few weeks ago I was adamant that something has changed. I was quite bearish and expecting a support break for BTC, ETH and everything else. We got the dip on Friday that swept everyone out of the tight range but it was immediately bought back…Bullard from the Fed had some bullish things to say and we reclaimed the support and held on with nice volume, as well as in stocks. I said to my friends and the dojo, something is different. That was supposed to breakdown but there were buyers there. The market just feels very different.”

When asked about whether or not Dogecoin’s (DOGE) recent 100%+ pump is a one-off or a sign of a wider trend change, KJ said:

“I feel there’s something bigger behind it, personally. When you’re comparing structure, even thorough price rejected at a certain level, it’s actually starting to look quite bullish to me. I wouldn’t be surprised to see a reflation trade where price goes up to like $0.55, comes down and then marks up again.”

KJ suggested that Elon’s new leadership of Twitter “people are speculating that there is going to be some sort of DOGE integration involved. I think it’s a reasonable speculation actually.”

Is the market bottom in?

In regards to a wider turn around in sentiment, investors’ appetite for risk and the crypto market carving out a bottom, KJ explained that DOGE’s recent bullish price action is:

“Showing that there’s a greed element that is there again. In the past the DOGE move would have gotten sold off, somewhat immediately, not the numbers that it did. We might have got a 20% move that was sold off by the end of the day. Litecoin as well also shows greed in the market and risk taking behavior and this risk, in my opinion, is not being taken by “normies” yet. These are more powerful players that are willing to do so.”

To hear more alpha from KJ, tune in to Market Talks here, and come back every Thursday at 12:00 pm ET to hear feature interviews with some of the most influential and inspiring people from the crypto and blockchain industry.

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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

How long will the bear market last? Signs to watch for a crypto market reversal

October 20, 2022 Coin Telegraph

Coin Telegraph

This crypto bear market has been long and painful, but here are a few signs that might signal when it could come to an end.

The current crypto bear market has induced panic, fear and uncertainty in investors. The dire situation started when the global crypto market capitalization dropped below the $2 trillion mark in January 2022. Since then, the price of Bitcoin (BTC) has decreased by over 70% from its all-time-high of $69,044.77 reached on Nov. 10, 2021. Similarly, the values of other major cryptocurrencies such as Ether (ETH), Solana (SOL), Avalanche (AVAX) and Dogecoin (DOGE) have decreased by around 90%.

So does history tell us anything about when the bear market will end? Let’s start by examining the causes of the 2022 bear market.

Catalysts of the 2022 bear market

There are several factors that caused the current bear run.

First off, the build-up to the bear market started in 2021. During this period, many regulatory authorities threatened to introduce stringent laws governing cryptocurrencies. This created fear and uncertainty in the market. For example, the U.S. Securities and Exchange Commission (SEC) issued a lawsuit against Ripple . China banned Bitcoin mining, resulting in most BTC miners having to relocate to other countries.

A global increase in inflation and rising interest rates instilled fear and uncertainty in the market resulting in lower crypto investment than expected. Although there is much publicity pertaining to the United States inflation and interest rate, other countries such as India have experienced similar challenges.

Notably, earlier this year the Federal Reserve announced that it was taking stringent measures to “accelerate tapering of monthly bond purchases." In other words, the United States planned to introduce measures that slow down its economy to control the ever-rising inflation in the country. The following graph shows the inflation trend from 2016 to 2022.

*FRED consumer price index. Source:* *St. Louis Fed*

In effect, to reduce the rate of inflation, the Federal Reserve increased the Federal Funds rate two times during the year. This reduced the disposable income of U.S. residents, thereby dampening investment effort in risk assets like cryptocurrencies.

*United States Interest Rate. Source:* *St. Louis Fed*

Crypto analysts believe that leverage was another primary cause of the current bear market. Leverage entails pledging a small amount of money as collateral to borrow a large amount for investing. In this case, investors borrow from exchanges to finance their investments in the market.

The downside of leverage is that once the price of an asset begins to fall, the trading positions liquidate, resulting in a cascading crash of cryptocurrency prices. This lowers investor confidence and tends to inject fear and uncertainty in the market.

Whereas traditional markets have circuit breakers and protections, this is not the case for the crypto market. Take, for example, the recent collapse of Terra Luna — formerly known as Terra Classic (LUNC) — and its UST stablecoin. Within the same period, several other crypto firms such as Celsius and Three Arrows Capital and Voyager Capital filed for bankruptcy.

Signs that the bear market is nearing an end

Analysts study market cycles to predict when a bear market will come to an end. Generally, market cycles include four phases: accumulation, markup, distribution and a mark-down. For Bitcoin, the market cycle occurs over four years or 1,275 days. The last phase usually relates to the bear market.

*Bitcoin market cycles. Source: Grayscale*

According to Grayscale, the crypto bear market commences when the realized price of Bitcoin surpasses its market price. Grayscale defines realized price as,

“The sum of all assets at their purchase price or realized market capitalization, divided by the market capitalization of the asset which provides a measure of how many positions are in or out of profit.”

The realized price of BTC surpassed the market price on 13 June 2022. The table below shows the prices of bitcoin when its market price was greater than the realized one.

*BTC’s realized price vs market price. Source: Grayscale*

It is interesting to note that by July 12, the cycle had completed 1,198 days. Since the entire cycle takes 1,725, it means that by that date there were 4 months until the realized price would cross above the BTC market price.

However at the end of the 4 months, Bitcoin would need another 222 days to reach its previous all-time-high. What this means is that from July, it would take a total of 5 to 6 months for the bear market to end. The graph summarizes the expected trajectory of the current crypto cycle.

*The 2020 Bear and bull market cycle. Source: Grayscale*

If the current market cycle takes a similar structure as the 2012 and the 2016 cycles, and if Grayscale’s findings are accurate, then the bear market could end between November 2022 and December 2022.

How long Bitcoin traders expect the bear market to last

Bitcoin maximalists tend to look toward the Bitcoin halving as an indicator to predict the next bull run. Examining history, Bitcoin has formed a peak within 18 months of each Bitcoin block reward halving.

*History of Bitcoin halving. Source:* *swyftx*

In the past, Bitcoin halving preceded the past crypto bull run as indicated in the above graph. So BTC maxis that contend the halving schedule directly impacts the bullish or bearish nature of Bitcoin, might be correct.

*Bitcoin and S&P 500 correlation chart on October 20, 2022. Source:* *TradingView*

The 2022 bear market is unique due to several reasons. First, key macroeconomic variables such as high interest rates and soaring inflation increased its impact. As well, the Terra Luna crash and a high leverage throughout the entire crypto ecosystem contributed to the onset of a bear run.

Remarkably, it is the first bear market where there is correlation between the stock market and bitcoin, with the correlation rate of over 0.6 in July, 2022 according to Coinmetrics data. Next, it is the first time that the value of BTC has fallen below the previous cycle peak. In this context, the value of BTC fell below $17,600.

*BTC and S&P 500 correlation rate. Source:* *Coin Metrics*

The contrasting situations between the 2021 crypto bull run and the 2022 bear market have baffled crypto investors. Analysts believe that the current bear market will end between November and December 2022, with a possible bull run expected at the end of 2024 to early 2025.

3 emerging crypto trends to keep an eye on while Bitcoin price consolidates

October 14, 2022 Coin Telegraph

Coin Telegraph

BTC’s price is range-bound, giving other assets room to gain a foothold in an otherwise down market.

This week, Bitcoin’s (BTC) price took a tumble as a hotter-than-expected consumer price index (CPI) report showed high inflation remains a persistent challenge despite a wave of interest rate hikes from the United States Federal Reserve. Interestingly, the market’s negative reaction to a high CPI print seemed priced in by investors, and BTC’s and Ether’s (ETH) prices reclaimed all of their intraday losses to close the day in the black.

A quick look at Bitcoin’s market structure shows that even with the post-CPI print drop, the price continues to trade in the same price range it has been in for the past 122 days. Adding to this dynamic, Cointelegraph market analyst Ray Salmond reported on a unique situation where Bitcoin’s futures open interest is at a record high, while its volatility is also near record lows.

These factors, along with other indicators, have historically preceded explosive price movements, but history will also show that predicting the direction of these moves is nearly impossible.

So, aside from multiple metrics hinting that a decisive price move is brewing, Bitcoin is still doing more of the same thing it’s done for the past 4.5 months. With that being the case, it is perhaps time to start looking elsewhere for emerging trends and possible opportunities.

Here are a few data points that I’ve continued to be intrigued by.

New rotations will emerge

ETH’s price has lost its luster in the now post-Merge era, and the asset now reflects the bearish trend that dominates the rest of the market. Since the Merge, ETH’s price is down 30% from its $2,000 high, and it’s likely that a good deal of the speculative capital that backed the bullish Merge narrative is now in stablecoins looking for the next investment opportunity.

Aside from ETH being an asymmetrical performer in the last four months, Cosmos (ATOM) also defied the market downtrend by posting a monster rally from $5.40 to $16.85. As covered thoroughly by Cointelegraph, oversold conditions, along with the hype of Cosmos 2.0, backed the bullish price action seen in the altcoin, but this chart continues to capture my imagination.

*ATOM emissions schedule (old vs. new). Source: Cosmos Hub*

According to the revised Cosmos white paper, the current supply of ATOM will dynamically adjust based on the supply and demand of its staking. As shown in the chart above, when Cosmos 2.0 “kicks in” for the first 10 months, issuance of new ATOM tokens is high, but after the 36th month, the asset becomes deflationary.

*ATOM/USDT 3-day chart. Source: TradingView*

From the vantage point of technical analysis, ATOM’s price appears to have hit a local top as the months leading up to Cosmos 2.0 were a “buy the rumor, sell the news” type of event, but it will be interesting to see what transpires with ATOM’s price as the market approaches month 20 in the diagram above.

Keep an eye on Ethereum Network activity

*Ether emissions plummet post Merge. Source: Delphi Digital*

Since the Ethereum Merge, Ether emissions have dropped by 97%, and while the price has pulled back significantly, over the coming months, investors might keep an eye on Ethereum network activity, developments with ETH staking across decentralized finance (DeFi) and institutional products, along with any spikes in gas (connected to network activity).

*Ether supply dynamics. Source: Delphi Digital*

While the price could succumb to bearish pressure in the short term, if the market begins to turn around if new trends trigger increased use of DeFi products, it’s possible that ETH’s price could react positively to those developments.

Post-Merge, BTC price action will likely remain king

While new trends across various altcoins may emerge, it’s important to remember the wider context in which crypto assets exist. Global economies are on the rocks, and persistently high inflation remains an issue in the United States and many other countries. Bond prices are whipsawing, and a looming debt crisis makes its presence known on a daily basis. Risk-on assets like cryptocurrencies are incredibly volatile, and even the strongest price trends in crypto (whether backed by fundamentals or not) are subject to the whimsy of macro factors such as equities markets, geopolitics and other market events that impact investors’ sentiment.

Keeping this in mind, Bitcoin remains the largest asset by market capitalization within the crypto sector, and any sharp moves from BTC’s price are bound to support or suppress the micro trends that might be gaining traction in the market. There is still the possibility of a sharp downside in Bitcoin’s price, so traders are encouraged to calculate investment size according to their own appetite for risk, and while multiple metrics might support opening long positions in various crypto assets, it still seems too early to fully ape in.

This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter author at Cointelegraph. Each Friday, Big Smokey will write market insights, trending how-tos, analyses and early-bird research on potential emerging trends within the crypto market.

Bitcoin miner profitability under threat as hash rate hits new all-time high

October 4, 2022 Coin Telegraph

Bitcoin Miners

Analysts say Bitcoin miners’ worst days are probably behind them, but the network's soaring hash rate and the uptick in difficulty are weighing on profit margins.

The Bitcoin hash rate hit a new all-time high above 245 EH/s on Oct. 3, but at the same time, BTC miner profitability is near the lowest levels on record.

With prices in the low $20,000 range and the estimated network-wide cost of production at $12,140, Glassnode analysis suggests “that miners are somewhat on the cusp of acute income distress.”

*Bitcoin network hash rate. Source: Hashrate Index*

Generally, difficulty, a measure of how “difficult” it is to mine a block, is a component of determining the production cost of mining Bitcoin. Higher difficulty means additional computing power is required to mine a new block.

Utilizing a Difficulty Regression Model, the data shows an R2 coefficient of 0.944 and the last time the model flashed signs of the miners' distress was during BTC’s flush out to $17,840. Currently, it hovers near $18,300, which is not far from the price range seen in the past two weeks.

*Bitcoin: Difficulty regression model. Source: glassnode*

The hash rate hitting a new all-time high effectively means that miner margins will be further squeezed and outfits that are unprofitable can either mine at a loss, assuming that BTC’s future price will eventually make up for the cost difference, or they can unplug and wait until either the difficulty drops or energy costs improve.

With the recent rise in hash rate, the difficulty is also likely to rise in the next week, with estimates pointing to a 6% to 10% adjustment.

*Bitcoin network hash rate (left) and projected difficulty adjustment (right). Source: BTC.com*

Shown below are estimations of miner profitability assuming an electricity rate of $0.08 kw/h.

*Bitcoin ASIC profitability. Source: DxPool*

Depending on a miners’ capital costs and operational costs, the profit stats above clearly illustrate the tightrope some miners are attempting to balance on at the moment.

Despite the stress on profitability, independent market analyst Zack Voell suggested that miners with healthy balance sheets are constantly looking for ways to expand their operations and the recent surge in hash rate could be related to Bitmain’s newest S19 XPs coming online.

Miners who aren't broke or suing each other continuing to deploy what they can. Every month has a couple headlines (at least ) about new facilities being planned or energized. And a lot of the new hashrate is from XPs coming online
— Zack Voell (@zackvoell) October 3, 2022

Is Bitcoin in the clear?

What investors really want to know is whether or not Bitcoin price is in the clear or whether there is an elevated risk of another sell-off driven by miner capitulation.

According to Colin Harper, the head of research at Luxor Technologies:

"Miners are still selling in the current environment (for example, Riot sold 300 BTC last month and Bitfarms sold 544 BTC). By my estimation, we're more likely to be driven lower by general selling, not miner selling particularly. If BTC price does go to $10,000, in addition to more miners capitulating via BTC sales, there would also be a lot of rigs flooding the market. We are not trying to single out Riot or Bitfarms, these are just the current updates we have, besides Hut 8, which didn't sell any BTC.”

On the other hand, Joe Burnett, the head analyst at Blockware Solutions, said that the bulk of miner selling has likely passed, which reduces the possibility of another capitulation level sell-off.

Burnett told Cointelegraph:

“I think the small miner capitulation Bitcoin experienced this summer knocked out some weak and overleveraged players. I do not think we will see another significant drop in hash rate without Bitcoin making new lows below $17,600. It doesn't mean individual weak miners won't drop off this year and next, but the new gen rigs getting plugged in will likely be enough to keep hash rate trending upward.”

When asked about the surge in hash rate placing pressure on higher difficulty adjustments and the knock-on-effect on miner profitability, Burnett said:

“For sure. Individual weak players may drop off and get knocked out, but it won't be a significant and sudden "miner capitulation" without a drop in BTC price. Margins are definitely tight.”

According to Glassnode, their model of the “implied income stress of the Puell Multiple, with the explicit stress observation of the Difficulty Ribbon Compression” recently exited the zone where “miner capitulation is statistically likely,” suggesting that another miner-driven sell-off is unlikely at the moment.

*Bitcoin miner capitulation risk. Source: glassnode*

The analysts, however, were careful to stress that the aggregate size of Bitcoin held by miners is near 78,400 and any sharp downside move in BTC price could trigger selling from distressed mining outlets.

So what if Bitcoin price keeps falling! Here is why it’s time to start paying attention

September 30, 2022 Coin Telegraph

Bitcoin

Tune out the noise and focus on the signal. 5 important BTC price indicators are in multi-year “buy zones.”

For bulls, Bitcoin’s (BTC) daily price action leaves a lot to be desired, and at the moment, there are few signs of an imminent turnaround.

Following the trend of the past six or more months, the current factors continue to place pressure on BTC price:

Persistent concerns of potential stringent crypto regulation.
United States Federal Reserve policy, interest rate hikes and quantitative tightening.
Geopolitical concerns related to Russia, Ukraine and the weaponization of high-demand natural resources imported by the European Union.
Strong risk-off sentiment due to the possibility of a U.S. and global recession.

When combined, these challenges have made high volatility assets less than interesting to institutional investors, and the euphoria seen during the 2021 bull market has largely dissipated.

So, day-to-day price action is not encouraging, but looking at longer duration metrics that gauge Bitcoin’s price, investor sentiment and perceptions of valuation do present some interesting data points.

The market still flirts with oversold conditions

On the daily and weekly timeframe, BTC’s price is pressing against a long-term descending trendline. At the same time, the Bollinger Bands, a simple momentum indicator that reflects two standard deviations above and below a simple moving average, are beginning to constrict.

Tightening in the bands usually occurs before a directional move, and price trading at long-term resistance is also typically indicative of a strong directional move.

Bitcoin’s sell-off from March 28 to June 13 sent its relative strength index (RSI) to a multi-year record low, and a quick glance at the indicator compared against BTC’s longer-term price action shows that buying when the RSI is deeply oversold is a profitable strategy.

*BTC/USD weekly chart relative strength index. Source: TradingView*

While the short-term situation is dire, a price agnostic view of Bitcoin and its market structure would suggest that now is an opportune moment to accumulate.

Now, let’s contrast Bitcoin’s multi-year price action over the RSI to see if any interesting dynamics emerge.

*BTC/USD weekly chart. Source. TradingView*

In my opinion, the chart speaks for itself. Of course, further downside could occur, and various technical and on-chain analysis indicators have yet to confirm a market bottom.

Some analysts have forecast a drop to the $15,000–$10,000 range, and it’s possible that the buy wall at $18,000 is absorbed and turns into a bull trap. Aside from that event, increasing position size at the occurrence of an oversold weekly RSI has yielded positive results for those brave enough to take a swing.

Another interesting metric to view in the longer timeframe is the moving average convergence divergence (MACD) oscillator. Like the RSI, the MACD became deeply oversold as Bitcoin’s price collapsed to $17,600, and while the MACD (blue) has crossed above the signal line (orange), we can see that it still lingers in previously untested territory.

The histogram has turned positive, which some traders interpret as an early trend reversal sign, but given all the macro challenges facing crypto, it should not be heavily relied upon in this instance.

What I find interesting is that while Bitcoin’s price is painting lower highs and lower lows on the weekly chart, the RSI and MACD are moving in the opposite direction. This is known as a bullish divergence.

*BTC/USD weekly chart reflecting bullish divergences. Source: TradingView*

From the vantage point of technical analysis, the confluence of multiple indicators suggests that Bitcoin is undervalued. Now, with that said, the bottom does not appear to be in, given that a bevy of non-crypto-specific issues continues to inject weakness into BTC’s price and the wider market. A drop to $10,000 is another 48% slide from BTC’s current valuation near $20,000.

Let’s take a look at what the on-chain data is showing at the moment.

MVRV Z-Score

The MVRV Z-Score is an on-chain metric that reflects a ratio of BTC’s market capitalization against its realized capitalization (the amount people paid for BTC compared to its value today).

According to co-creator David Puell:

“This metric clearly displays the peaks and busts of the price cycle, emphasizing the oscillation between fear and greed. The brilliance of realized value is that it subdues ‘the emotions of the crowds’ by a significant degree.”

Basically, if Bitcoin’s market value is measurably higher than its realized value, the metric enters the red area, indicating a possible market top. When the metric enters the green zone, it signals that Bitcoin’s current value is below its realized price and that the market could be nearing a bottom.

*Bitcoin MVRV Z-Score. Source: Glassnode*

Looking at the chart, when compared against Bitcoin’s price, the current 0.127 MVRV Z-Score is in the same range as previous multi-year lows and cycle bottoms. Comparing the on-chain data against the technical analysis indicators mentioned earlier again suggests that BTC is undervalued and in an optimal zone for building a long position.

Reserve Risk

Another on-chain data point showing interesting data is the Reserve Risk metric. Created by Hans Hauge, the chart provides a visual of how “confident” Bitcoin investors are contrasted against the spot price of BTC.

As shown on the chart below, when investor confidence is high, but BTC price is low, the risk to reward or Bitcoin attractiveness versus the risk of buying and holding BTC enters the green area.

During times when investor confidence is low, but the price is high, Reserve Risk moves into the red area. According to historical data, building a Bitcoin position when Reserve Risk enters the green zone has been a good time to establish a position.

*Bitcoin reserve risk. Source: LookIntoBitcoin*

As of Sept. 30, data from LookIntoBitcoin and Glassnode both show Reserve Risk trading at its lowest measurement ever and outside the boundaries of the green zone.