Experts believe that Bitcoin will not soon be in the green. We are not yet at the bottom.
This is the conclusion reached by analysts from the Huobi Research Institute (the research arm of Huobi cryptocurrency), in a recently released report.
According to their report “Is Another Black May Come”, Huobi researchers Barry Jiang & Hanson Chan stated that Bitcoin is still at its bottom and value investors should not buy.
Huobi’s argument stems from the idea that the market bottom Bitcoin is determined by looking at its Net Unrealized Profit/Loss percentage. This is the difference between Bitcoin’s market cap and its realized limit divided with its market capital.
The realized cap of Bitcoin is the total realized value all coins in the network. It is calculated based on the last time each unspent transaction output has been moved. Realized caps don’t include lost or dormant currencies.
Five different types of the NUPL are available: euphoria/greed; belief/denial; optimism/anxiety; hope/fear and capitulation. According to this logic, the capitulation phase is when price drops to its lowest. This is when buyers should jump in. According to Bitcoin’s NUPL chart the asset is currently in fear and has not reached its lowest price for this cycle.
According to the Bitcoin NUPL assessment by CryptoQuant, investors are in a Fear phase. This is where they have unrealized profits that are slightly higher than losses.
Huobi’s Jiang stated via email to Decrypt that he believes Bitcoin’s bottom will be between $20,000 and $25,000. Yuya Hasegawa is a market analyst at Bitbank in Japan. She has a more optimistic outlook.
“The price fell from 40-50% to Hope/Fear after NUPL turned orange [to hope/fear].” If the current pattern continues, bitcoin’s price could drop to around $15k. This is in line with my technical analysis that I published Monday, although my price target is $12.2k),” Hasegawa said to Decrypt via email.
Bitcoin fell below $30,000 today, reaching a low price of $28,170–its lowest since December 2020.
Benjamin Cowen, a cryptoanalyst and CEO of quantitative market analytics platform Into The Cryptoverse told Decryptthat based upon a variety of metrics, there is “still more potential downside” to the market.
“The running 1 year [return-on-investment] shows there could be more downside,” Cowen said, referring to a chart with data from analytics firm CoinMetrics, adding that the number of long-term Bitcoin holders (longer than six months) also plateaued a few months ago.
The public’s interest in cryptocurrency seems to be declining, according to data from Social Blade. This is because top YouTube channels that are crypto-related are losing their viewers.
However, regardless of the position of the retail investor on crypto, analysts think that current on-chain metrics such as the NUPL don’t have any value in this climate.
“To be truthful, I find onchain metrics pretty useless during the current market, since Bitcoin is clearly connected to the stock exchange during this fearful market,” Bendik Norheim Schei (head of research at Arcane Research) told Decrypt via email.
Schei said that the correlation with Nasdaq has reached an all-time high and that investors have been putting Bitcoin in the same basket of risky tech stocks as them.
How can investors predict where Bitcoin’s price will go over the next few weeks and months?
Schei stated that the stock market is currently the most important indicator of Bitcoin. He stated that the $30,000 current level, which is being tested this week, has been a strong support level for 2021 and is currently holding. However, he cautioned that it could fall if the stock markets continue to decline.
GlobalData Senior Analyst Lil Read agreed with this view but also stated that cryptocurrencies don’t work as an inflation hedge.
“Many crypto investors see the fact that they don’t have a relationship to traditional assets such as shares in a company or gold as intrinsic to their cryptocurrency attraction and value proposition,” Read stated to Decrypt via email. Some crypto bulls considered cryptocurrencies an asset to protect against inflation. But that is clearly not the case. The reality is that cryptocurrencies have been tracking wider market trends for the past few weeks.
Read pointed to the recent US Federal Reserve decision to raise interestrates as the primary trigger for the downtown. He also stated that “pricing dynamics” in crypto will likely reflect broader market trends, until there is a new level, which may take months or even years.
