The bull market has disappeared and the reality of a long cryptographic winter is surely giving traders a bad case for the chills. The price of Bitcoin (BTC) has fallen to a minimum not even bearish expectations expected, and it is likely that some investors will scratch their heads and wonder how BTC will return from this epic decline.
Prices are going down every day, and the current question in everyone’s mind is, “When is it going to bottom out and how long will the bear market last?”
While it is impossible to predict when the bear market will end, the study of previous low trends provides an idea of when the phase is coming to an end.
Here’s a look at five indicators that traders use to help you know when a crypto winter is coming to an end.
The crypto industry is starting to recover
One of the classic signs that a cryptographic winter has begun is widespread layoffs across the cryptographic ecosystem as companies seek to cut spending to survive the impending shortage times.
News headlines throughout 2018 and 2019 were filled with layoffs from major industry players, including technology companies like ConsenSys and Bitmain, as well as cryptographic exchanges like Huobi and Coinfloor.
The recent eruption of layoff announcements such as the 18% reduction in Coinbase staff and a 10% cut in Gemini are worrisome, and as the current bear market has just begun, layoffs are likely to increase. This means that it is probably too early to refer to this metric as proof that the bear market is declining.
A good sign that a cryptocurrency spring is approaching is when companies start hiring again and launching new projects with notable funding announcements. These are indications that funds are starting to flow back into the ecosystem and the worst of the bear market is in the past.
See if the 200-week Bitcoin SMA becomes resistance or support
A technical development that marked the end of a bearish period several times in the history of Bitcoin is when the price falls below the 200-week simple moving average (SMA) and then rises above it again.
As shown in the zones featured by purple arrows in the previous chart, previous cases in which the price of BTC fell below the 200-week SMA, the light blue line, and then rose again above the metric preceded the upward trends in the market.
A solid BTC price recovery above the realized price, which is the aggregate purchase price of all Bitcoin and is represented by the green line in the chart above, can also be used as an additional confirmation that the market trend may also be to be positive. .
The RSI is king at the starting point
Another technical indicator that can provide information on when the lows in a bear market may be low is the relative strength index (RSI).
More specifically, previous bearish markets have seen the Bitcoin RSI fall into oversold territory and fall below a score of 16 around the time BTC set a low.
Based on the two cases highlighted above with orange circles, the confirmation that the minimum does not arrive until the RSI rises again above 70 in overbought territory, indicating that an increase in demand has returned to the market.
Market value to realized value
The Z-score from market value to realized value (MVRV) is a metric designed to “identify periods in which Bitcoin is highly overvalued or undervalued relative to its ‘fair value’.”
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 the ends of the data between the market value and realized value “.
As can be seen in the chart, the previous bear markets matched a Z score below 0.1, which is highlighted by the green box at the bottom. The start of a new uptrend was not confirmed until the metric rose again above a score of 0.1.
Based on historical performance, this metric suggests that there could be even more disadvantages in the near future for Bitcoin, followed by a prolonged period of side price action.
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2-year moving average multiplier
One final metric that can provide 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 multiplies by 5 the 2-year moving average (MA) with the price of Bitcoin.
Whenever the price of BTC fell below the 2-year MA, the market entered the territory of the bear market. Once the price has risen above the 2-year MA, there will be an uptrend.
On the other hand, the price that was rising above the 2-year MA x5 line signaled a complete bullish market and presented a timely moment for profit.
Traders can use this metric as a sign of when may be a good time for accumulation, as highlighted by green shaded areas, or they can wait until the BTC price clears year 2 as a sign that the bear market is over. .
Whichever way a trader chooses to apply the indicators described above, it is important to remember that no indicator is perfect and there is always the risk of further disadvantage.
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