BitMEX Article: Summarizing Past Bear Market Performance and On-chain Data: Bitcoin Bear Market Just Beginning

This article is part of a series of special articles released by the research team of the cryptocurrency media Bitcoin Magazine and the trading platform BitMEX. The author compares different indicators and the performance of Bitcoin in past bear markets with the current cycle, concluding that the bear market is just beginning.

Forced to Surrender Due to Price Decline

Comparing Bear Market Cycles

Being forced to surrender due to price decline refers to the situation where the price of cryptocurrencies drops by 70% to 90% from their historical highs, causing investors to sell off their coins due to unbearable losses. However, this also indicates the possibility of the market bottoming out, as the last wave of investors unwilling to admit defeat has already given up.

The remaining holders are either steadfast long-term believers or investors who have only put in discretionary funds and are not concerned about price fluctuations. The article points out that this Bitcoin cycle is not significantly different from the past.

At the time of writing, Bitcoin had dropped by -69.72% from its previous high, with the highest drop recorded on 5/18 at -71.86%. In past bear markets, Bitcoin experienced the following declines:

• 11/18/2011: -93.08%
• 1/14/2015: -84.82%
• 12/15/2018: -83.47%

Bitcoin Realized Capitalization

The Realized Price/Market Capitalization Metric was created by Coin Metrics, summarizing the price at which each Bitcoin was last "on-chain," excluding speculative trading behavior on centralized platforms, and deriving a fair price for Bitcoin.

The chart below illustrates that Bitcoin's every collapse has fallen below the realized capitalization indicator. Over a longer time period, Bitcoin's returns have also shown parabolic growth. The author believes that this chart/metric is a classic demonstration of "forced surrender."

Forced to Surrender Due to Time

"Time" is an indicator that is less frequently mentioned compared to price, indicating that speculators sell off due to prolonged losses, and the market gradually reaches a supply-demand equilibrium in the trough.

The chart below shows the "days" in a bear market cycle when Bitcoin's price is lower than the current holder's cost. In the latest developments on the far right of the chart, marginal sellers have sold off Bitcoin, causing the price to begin falling below the Hodlers' average cost. For investors, a prolonged decline is more painful than a price crash. The author believes this signifies that the bear market is just beginning.

Length of Bear Market Cycle

Next, the author uses the Bitcoin MVRV Ratio (Market Value to Realized Value Ratio) to estimate the duration of the bear market.

In the first three bear markets, the average number of days that Bitcoin's price was lower than the realized value was 244 days, excluding 312, while currently, it is less than 30 days. Based on the 244-day benchmark, Bitcoin's price is projected to recover above the realized value average by mid-February next year.

The author contrasts the current price path with the 2018 bear market for summary purposes, starting from when the Bitcoin price fell below the holder's average cost. The results are also evident.

The author points out that the largest capitulation event in Bitcoin's history is likely just beginning, with more liquidity crises, insolvency, and worsening macroeconomics. Holders should be prepared, as they will not only face a more sluggish market in the future, but also many floating chips will continue to be sold to Hodlers, undoubtedly leading to further declines and sideways movements.

However, the author also urges:

Bitcoin will survive, and your mission is to survive in such a harsh environment.