The bull market has almost completely disappeared and the reality of a long crypto winter is surely giving traders a bad case of the chills. The price of Bitcoin (BTC) has fallen to lows that even the most bearish were not expecting, and it is likely that some investors are scratching their heads and wondering how BTC will recover from this epic drop.
Prices are falling daily, and the current question on everyone’s mind is “when will the market bottom and how long will the bear market last?”
Although it is impossible to predict when the bear market will end, studying previous downtrends allows you to know when the phase is coming to an end.
Here are five indicators that traders often use to know when a cryptocurrency bear market is coming to an end.
The cryptocurrency industry begins to recover
One of the classic signs that crypto winter has arrived is mass layoffs in the crypto ecosystem, as companies look to cut costs to survive the lean times ahead.
News headlines throughout 2018 and 2019 were filled with layoff announcements from major industry players, including tech companies like ConsenSys and Bitmain, as well as crypto exchanges like Huobi and Coinfloor.
The recent wave of layoffs such as Coinbase’s 18% downsizing and Gemini’s 10% cut are concerning, and given that the current bear market is just beginning, layoffs are likely to be on the rise. This means that it is probably too early to refer to this metric as proof that the bear market is in decline.
A good sign that a new uptrend is coming is when companies start hiring again and new projects are launched with notable funding announcements. These are signs that funds are starting to flow back into the ecosystem and that the worst of the bear market is in the past.
Pay attention if Bitcoin’s 200-week SMA turns into resistance or support
A technical event that has signaled the end of a bearish period multiple times in Bitcoin history is when the price falls below the 200-week simple moving average (SMA) and then rises back above it.
As shown in the areas highlighted Per the purple arrows in the chart above, previous instances where BTC price fell below the 200-week SMA (the light blue line) and then rose back above the metric preceded uptrends in the market.
A strong BTC price recovery above the realized price, which is the aggregate purchase price of all bitcoins and is represented by the green line in the chart above, can also be used as further confirmation that the market trend it may be turning positive too.
The RSI is one of the best indicators
Another technical indicator that can offer insight into when bear market lows may be hit is the Relative Strength Index (RSI).
More specifically, previous bear markets have seen Bitcoin’s RSI enter oversold territory and drop below a score of 16 around the time BTC set a low.
Based on the two cases highlighted above with orange circles, confirmation that the bottom has already been established does not come until the RSI rises back above 70 into overbought territory, signaling that a surge in demand has returned to the low. market.
Market value and realized value
The Market Value and Realized Value (MVRV) Z-score is a metric that is designed to “identify periods when Bitcoin is grossly overvalued or undervalued relative to its ‘fair price.'”
The blue line in the graph above represents the current market value of Bitcoin, the orange line represents the realized price, and the red line represents the Z-score, which is a “standard deviation test that pulls out the extremes of the data between the value of market and realized value.
As seen on the chart, previous bear markets have all coincided with a Z-score of less than 0.1, which is highlighted by the green box at the bottom. The start of a new uptrend was not confirmed until the metric returned above the 0.1 score.
Based on historical performance, this metric suggests that there could still be more declines in the near future for Bitcoin, followed by an extended period of price action without many surprises.
Multiple of the 2-year moving average
One final metric that may offer a simplified way for Bitcoin investors to know when the bear market is over is the 2-year moving average multiplier. This metric tracks the 2-year moving average and a 5-fold of the 2-year moving average (MA) with the price of Bitcoin.
Every time the price of BTC fell below the 2-year MA, the market entered bear market territory. Once the price rose back above the 2-year MA, an uptrend ensued.
On the other hand, the rise in price above the line of the 2-year MA multiplied by 5 indicated a full-fledged bull market and presented an opportune time to take profits.
Traders can use this metric as a signal of when it might be a good time to accumulate, as highlighted by the green shaded areas, or they can wait until BTC price breaks above 2 years as a sign that the bear market has ended. finished.
Whichever way a trader decides to apply the above indicators, it is important to remember that no indicator is perfect and there is always a risk of further declines.
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