A Bear Market History Lesson
As Bitcoin attempts to re-find equilibrium, it’s time to revisit previous bear market structures to better think through the potential levels where we may ultimately start to bottom out.
G’day Folks,
Every prior Bitcoin bear market has bottomed below the Realised Price, which is currently trading around $56k. The 200-week moving average is also trading very close to this level at around $55.8k, and this technical level has also been intersected in all late stage bears.
I am already seeing consensus starting to form that this bear market will be no different, and therefore the $56k level is quickly becoming the target for many investors.
The Realised Price metric represents the average cost basis per Bitcoin in the supply, irrespective of who owns it, and whether it has actively participated in the current market cycle.
One of the challenges with this classic onchain model, is that in order to hit the $56k ‘break-even level’, the unrealised losses held by active investors needs to completely offset the tremendous unrealised profit held by lost and long-dormant coins.
As David Puell and I explored in Cointime Economics, as Bitcoin gets larger, it is my expectation that the Realised Price will continue to drift further away from being an accurate read on the real cost basis for the market.
This cycle has displayed numerous characteristics which are not like prior cycles, and as a result, my base case is that many investors will get lost trying to apply old rules to modern dynamics.
We should certainly keep this ‘self-fulfilling prophecy’ idea of a revisit to the Realised Price and 200-WMA in mind. However, I don’t believe this kind of rigid ‘it must happen because it previously happened’ thinking will serve us as well this time around.
In today’s piece, I run through a bear market history lesson for where previous cycles bottomed out, and build out my logic for why those dynamics may, or may not hold the same water in our current environment.
📈 Reminder: you can find the charts from our articles on the Checkonchain Charting Website, and a guide in our Charts Tutorial Video.
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