As Bitcoin Plunges Below $95K, Is Crypto in a Bear Market?

The massive flow of exchange-traded funds, declining institutional and retail appetite, and increased selling pressure from whale activity have investors wondering if crypto is in a bear market.

Bitcoin fell below $95,000 on Friday morning, down 8% on the day and more than 24% since its record high of $126,200 just five weeks ago, according to CoinGecko data. Over the past 24 hours, more than $1.24 billion in crypto longs have been liquidated amid the market slump, according to CoinGlass data.

The selloff is not limited to crypto markets and can be seen in stocks, with the S&P 500 index falling almost 1% in the pre-market session, while gold is down 2.76% today.

The bellwether crypto is down more than 10% from its Monday highs, putting it on track for a third straight week in a nearby candlestick.

This bearish sentiment is reflected in the drop in investor confidence, as seen on the prediction market Myriadwhere the probability of Bitcoin users hitting $115,000 before $85,000 have fell down from 71% just four days ago to 46%. (Disclaimer: Myriad is owned by Decrypt’s the parent company Dastan).

Define the drop

“Judging by the movements of the market in the last three months, we must conclude that we are currently in a bear market.” Adam Chu, chief researcher at options analytics platform GreeksLive, said Decrypt.

Despite the presence of considerable divergence in investor sentiment this week, “power options have now gained the upper hand following Bitcoin’s breach below the $100,000 mark today,” Chu added.

“CryptoQuant’s Bull Score illuminates bear market territory: 8 out of 10 key metrics on the chain are bearish,” Maarten Regterschot, CryptoQuant verified analyst, said. Decrypt. “From the drop in stablecoin liquidity to the decrease in network activity and capital flowing out of derivatives, this setup reflects the cycle of late 2021 and early 2022.”

In perpetual markets, open interest, which tracks total open positions, has been rising steadily since the Oct. 10 liquidation event that wiped out $19 billion in positions, suggesting an increase in speculative activity. Meanwhile, the delta of the cumulative volume, which is the difference in the total buy and sell, is constantly decreasing, suggesting that the sellers are in control.

When combined, these two indicators suggest that short sellers dominate the perpetual markets, according to Veil data.

A drop in the first of Coinbase, which tracks discrepancies and dynamics of capital between the crypto markets of the United States and global, in negative signals of the territory that the demand of the United States is. going downadding to the bearish sentiment.

A final factor is a drop in institutional demand due to macro and geopolitical uncertainties, as evidenced flows from exchange-traded funds and the slow down in the treasure-driven accumulation of digital assets.

Although geopolitical and macroeconomic uncertainty has been resolved, the overhang remains, with experts suggesting traders are focusing “on the damage already done,” including weeks of missing economic data, experts said earlier. said Decrypt.

Where next for Bitcoin?

All in all, the outlook for the crypto market remains grim, making this one of the worst performers of the fourth quarter.

Bitcoin’s sustained fall from its record high of $126,000 to below $96,000 prompted the formation of a “death cross,” a popular bearish signal found when the 50-day simple moving average crosses below the 200-day simple moving average, indicating that short-term momentum is declining faster than long-term momentum. The signal marks the beginning of a bear market, or so the belief.

“It’s less about calling peaks and troughs and more about recognizing that crypto is transitioning from an overheated environment to a more measured environment,” Shivam Thakral, CEO of Indian crypto exchange BuyUCoin, said. Decrypt.

“We are in a corrective phase in a broader cycle,” Thakral added, noting that a few key catalysts, such as economic data, regulatory developments, and the strength of the Bitcoin chain, will determine whether this correction turns into a full-blown bear market.