Recent months have brought significant changes in Bitcoin's price dynamics, causing concern among investors and analysts.
Is The Bull Market Over?
The 200-day SMA, or “simple moving average,” is a trend line tracking Bitcoin’s average price over the previous 200 days. Following Bitcoin’s surge to new all-time highs in March, Bitcoin’s price has remained mostly rangebound between $58,000 and $70,000, including a brief crash below to $50,000 in August. This consolidation period has given the 200-day SMA enough time to catch up to, and now surpass the market price. Verified CryptoQuant author Adel Axel Jr. said the loss of this support “formally indicates a bearish sentiment.” “Additionally, in recent days, increased leverage has been used on the top three exchanges,” he said over Twitter on Monday. “The nearest support level is the 365-day SMA ($50K).” Axel Jr. didn’t indicate a bear market had officially started, however: on Sunday, he called Bitcoin’s five-month consolidation since March “healthy” involving no “massive stress-induced panic sells” while most early investors slowly took profits. “realized losses have exceeded profits, which often occurs at the end of a consolidation period,” he added. Going forward, the analyst agreed that a “double test” near the $50,000 price level would be a “good scenario.”
Short Term Holders Now Underwater
Looking to on-chain data, lead Glassnode analyst James Check said Sunday that over 80% of short-term Bitcoin holdings are now underwater from when they were last bought. Short-term holders include anyone who bought their coins less than five months ago – a cohort of holders more likely to sell their coins when the market looks shaky. “This is similar to 2018, 2019, and mid-2021 which signaled many investors were at risk of panicking and precipitating a bearish trend,” Check wrote. That said, the actual magnitude of these losses is still quite shallow, meaning recent investors may not feel any panic quite yet. “Despite 80% of STH coins being in loss, the magnitude of Unrealised Loss is just 4% of the market cap,” Check continued.
Future of Bitcoin
Looking ahead, analysts see the possibility of a so-called ‘double test’ of the $50,000 level, which many consider a positive scenario for market recovery. The future development of the Bitcoin market, analysts believe, will depend on how investors and holders respond to the current situation and changes in SMA support.
Thus, Bitcoin's loss of key support levels raises concerns about the potential start of a bear market. Analysts remain worried about the leverage used and the behavior of short-term holders, but many see testing the $50,000 support level as a positive scenario for the future.
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