"Is the Bear Market Over? Glassnode Report: Bitcoin and Ethereum Both Performing Well, Entering an Upward Trend"

The data analytics platform Glassnode released the on-chain newsletter "The Capital Waterfall" a few days ago, indicating that the current market may have moved past the bear market recovery phase and is entering an upward trend. The price pullbacks of Bitcoin and Ethereum in this trend are significantly smaller than before, indicating an influx of funds from external investors.

This report represents the company's perspective only. Please carefully assess risks before investing.

Bitcoin and Ethereum Outperforming Gold in Price Performance This Year

The report first points out that as the two mainstream cryptocurrencies in the current market, Bitcoin (BTC) and Ethereum (ETH) have shown stronger price performance compared to gold, which is recognized as a store of value, amidst the ongoing macroeconomic uncertainty.

It is evident that the price of BTC has risen by 93% relative to gold, while ETH has risen by 39%. Both prices are closely related, but the upward momentum of BTC is stronger.

Digital Assets Have Greater Volatility Than Traditional Assets

Furthermore, it is well known that the price volatility of BTC and ETH is significantly higher than that of gold.

Bitcoin Shows More Resilience Against Declines Compared to Ethereum

Glassnode also compared the deepest pullback levels of BTC and ETH during this year's uptrend to assess the relative strength of their performances.

The report sets ETH's two recent lows after the FTX collapse event in November last year, showing a 44% drop from the last relative high and a current drop of 26%.

Data shows that this is much smaller than the pullback of over 60% seen during the uptrends of 2017 and 2020.

Bitcoin's performance is also impressive, with a maximum drawdown of only 20.1% in 2023, compared to 36% and 62.6% in the uptrends of 2017 and 2020, respectively, showing more resilience against declines.

Will the ETH-BTC Exchange Rate Rise?

Next, the report uses the retracement of the ETH-BTC exchange rate to observe the current market capital flow.

Historically, the market tends to see a decline in the value of Ethereum relative to Bitcoin during the bear market recovery period, indicating a flow of capital back to Bitcoin.

The chart shows that the previous two declines exceeded 50% and lasted over 300 days; the current decline is 38% and has lasted over 470 days.

In addition, the report highlights a period of relative weakness in the ETH-BTC exchange rate, indicating a ratio of around 0.052, similar to July last year.

Most Ethereum Holders Are in Profit

Examining the price of Ethereum, the report states that it was around $1,800 when released, with the average holding cost in the market around $1,475. While this is lower than the profit levels in a bull market, it signifies that most Ethereum holders are currently in a profitable position.

Additionally, the report uses the MVRV ratio to assess investors' profitability.

The report explains that when the MVRV ratio in blue is higher than its long-term average value in orange, it indicates increasing profits for investors and is usually a signal of a bullish market.

However, despite Ethereum's strong performance this year, the market has not shown a clear bullish signal according to this indicator, suggesting it is still digesting the bearish sentiment from 2022, with an overall cautious atmosphere of uncertainty.

Changes in Investor Confidence

The report also uses its "Investor Trend Confidence" indicator to evaluate the changing trends in Ethereum investor sentiment.

In summary, when the Spending cost basis is significantly lower than the Hodling cost basis, it indicates a more negative market sentiment, and vice versa for positive sentiment; when the two bases are close, the market sentiment is in a transitional state.

Based on this indicator, the report suggests that the market is currently in a transitional zone, showing positive sentiment but to a lesser extent.

Is a Market Breakout Imminent?

Is Altseason About to Begin?

The frenzy of altcoins soaring, known as Altseason, has always been a sign of an upcoming bull market. The report defines two prerequisites for this:

1. The overall market atmosphere sees an inflow of risk capital into BTC, ETH, and stablecoins
2. The overall market value of altcoins needs to show positive growth momentum

To determine whether the market value of altcoins shows positive momentum, the report uses the breakthrough of the 30-day SMA in the overall market value of altcoins as a positive signal, indicating that the current altcoin market may enter a growth phase.

Growth in Altcoin Market Value

Recently, there has been a significant increase in the total market value of altcoins, driven by the increase in Bitcoin market share, which could lead to price hikes in various altcoins.

Moreover, the percentage change in the market value of altcoins has experienced significant fluctuations only six times in the past two years, with the recent signal appearing again, the last time being in October last year.

Additionally, while Bitcoin's market value has grown by 110% in 2023, the market value of altcoins has only increased by 37%.