Bitcoin in a Panic: What if the Surrender Hasn’t Taken Place Yet?

The market is bleeding… While the macroeconomic context is still not encouraging, such as inflation that continues, cryptocurrencies are going through a period of cleansing. Since its peak in November last year, bitcoin has fallen by more than 60%. This is about first cryptocurrency by capitalization. The fall of altcoins is 90% and even more for some… Many analysts believe that we have entered a bear market in the short to medium term. In this article, we will try to answer the following question: did the actors capitulate? To do this, we will analyze the technique, market sentiment and look at the behavior of blockchain participants.

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Endless road: Bitcoin continues to be in the red for 7 weeks

This is unheard of. Bitcoin is going through a very difficult period, which was not helped by the recent UST case. The market collided strong sales since the Moon Foundation Guard had to sell their 80,000 BTC at a loss. This is not a negligible value, for comparison, Microstrategy has 130,000 bitcoins.

From a technical point of view, the real surrender that we experienced in 2018 brings the price back to the level moving average 200 periods (MA 200) in week unit of time. As the name suggests, a moving average is simply average price over n periods. Here is the weekly bitcoin chart:

Bitcoin price against the dollar (1W). Source: Trade Review

As we can see, the moving average acts like final support during the previous bear market (bear market). Bitcoin is approaching it, but the price has not yet touched the 200 MA. She is currently at the level $21,800 and it increases from week to week. Given the current context, it is unlikely that the price will not return to this moving average. In addition, professional players keep a close eye on this MA 200.

If the sell-off continues, bitcoin is likely to bounce back around $22,000. On the other hand, if buyers manage to defend brace at $29,000the moving average may continue to rise until it approaches the current price.

From a technical point of view at the moment no real surrender.

Market sentiment is bearish, does it look like capitulation?

Market sentiment is very interesting to analyze. This lets you know if the actors are euphoric or in fear. In order to surrender, the actors must be in extreme fear. This is how the traditional market works, and the cryptocurrency market is no exception to this rule. To do this, we can look at indicators that show market sentiment.

Crypto Fear and Greed: Market in Extreme Fear

Crypto fear and greed is a measure of market sentiment.  It is currently very low.
Crypto Fear and Greed Index chart. Source: Cryptocurrency Tracker

As can be seen from the chart, market sentiment currently low. We have already experienced such panic, especially during the 2020 Covid crash, last May and elsewhere. On this chart, you don’t have to decide whether to buy or sell, but it does let you know if the players are in an extreme position. There are often periods of intense fear. interesting places for shopping and periods of euphoria are often attractive selling points.

The indicator is not perfect. Indeed, he can remain in euphoria or in fear for several months. The indicator is currently in extreme fear, on 10 points.

US market fear and greed index also in extreme fear

Often repeated, the cryptocurrency market highly correlated with the US market. This one knows recession these last months. Market sentiment is very low and very close to the covid period:

Index of fear and greed. Source: CNN Business

The indicator pointed to one during covid. He is currently in 6 and shows the general fear in the US financial markets. Again, we can still dig, but it seems that the worst may be over. The recovery of the US market will be a positive factor for cryptocurrencies, given the current correlation.

Market Sentiment Indicator: Weighted Sentiment Indicator

Another indicator shows the market sentiment of the players. This is an indicator developed by Santiment called measured feeling. He is studying keywords used in social media to categorize them according to their connotation. Here is the chart:

According to Santiment, market sentiment doesn't seem strong enough.
Market sentiment chart. Source: Sentiment

This graph shows the differences from the previous one. It would seem (according to this indicator) that at the moment the market is not did not capitulate. Surrender shows extreme fear with a very low (pink) feeling. Indicator smoothed in 5 daysso it’s ok to be a little late. We stay very far from surrender as we experienced in March 2020 or July 2021.

Imagine bitcoin stays next to $30,000 for several weeks or months. After that, the indicator should drop sharply. The fact remains that at the moment no change if we follow this indicator, which has been historically significant.

Crypto Fear and Greed is in extreme fear, as are the US markets, but they can stay in the extreme for a long time. The Santiment website indicator shows that score can still be cleaned, or that we can stay close to current prices for a long time. In any case, one cannot speak of surrender, as was the case in March 2020.

On-Chain Analysis: Players Lose Money on Bitcoin, but Could It Get Worse?

Let’s start with the fact that on-chain analysis allows you to take into account behavior of actors at the blockchain level. Some indicators may be of interest for discussion. surrender. Accounting for the losses of market participants gives the following indicator:

Now the actors are suffering big losses.
Graph of losses of market participants. Source: glassnode

Result without appeal. actors know heavy losses now. Ever since the price crashed last May, players have regularly suffered big losses. Current levels are higher than during covid and are equivalent to those in May last year. We can talk about surrender on these data, although losses may still increase.

Another piece of data may be of interest to consider. This is about selling price. This is about ratio between realized capitalization (who filters inactive tokens in the blockchain) and outstanding offer.

Realization price chart.
Realized price chart. Source: glassnode

This graph shows that there is no surrender like in March 2020 or January 2019. Historically, studying the indicator, capitulation occurs when the price of bitcoin falls below the realized price. It is currently located at approximately $24,000. It is possible to see the price of bitcoin fall lower $24,000 by this indicator.

The historically realized price does not play the role of support, as it did with the 200-period moving average, but shows the price below which bitcoin is undervalued.

As a result, we can say that the market is in extreme fear, which is what you suspected. This is a historically interesting period for DCA averaging. Even if the actors are losing a lot of money, some elements suggest that the surrender is not in the news yet. We have seen that the 200-period moving average is even lower since selling price. Market sentiment is certainly low, but it could still improve. We can’t know if the market will necessarily seek this capitulation or “this time it’s different.”

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