Bear Market Length Has Now Matched Previous Cycles, Is Trend Reversal Imminent?

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Bear mar­kets always appear to be long, drawn-out affairs, but the steep down­trend only real­ly lasts a year or so.

The cryp­to indus­try hit its all-time high of just over $3 tril­lion in mar­ket cap­i­tal­iza­tion in Novem­ber 2021. Almost a year to the day lat­er, on Nov. 22, they hit a cycle low of $820 bil­lion, mark­ing a 73% drawdown.

In its recent “Ahead of the curve” report, Arcane Research observed that this bear cycle now match­es those in 2014 and 2018 in terms of length.

“BTC’s bear mar­ket has now last­ed at lengths com­pa­ra­ble to the bear mar­kets of 2014–15 and 2018.”

Bear Market Bottom?

How­ev­er, in the pre­vi­ous cycle, mar­kets fell 87% from $830 bil­lion in Jan­u­ary 2018 to just over $100 bil­lion mar­ket cap in Decem­ber of the same year. The mag­ni­tude of this cur­rent one has not been as great despite the col­lapse of Terra/Luna and FTX.

What fol­lowed the cycle low was a long peri­od of con­sol­i­da­tion and slow accu­mu­la­tion, which is what we could be see­ing at the moment.

The report not­ed that the cur­rent Bit­coin mar­ket (not total cryp­to cap) has seen a 376-day peri­od from peak to trough. In 2018, that peri­od was 364 days, and in 2014 it last­ed 407 days.

“Thus, while the cur­rent draw­down dura­tion has been at com­pa­ra­ble lengths to pre­vi­ous cycles, the depths are high­er for now.”

Mar­kets have lift­ed around 10% from the cur­rent bear mar­ket bot­tom last week. Rough­ly $80 bil­lion has gone back in lift­ing total cap­i­tal­iza­tion over $900 bil­lion again.

FED Pivot Good For Crypto

Oth­er influ­ences could also spell the mar­ket bot­tom and a trend change. The U.S. Fed­er­al Reserve’s piv­ot to less aggres­sive recov­ery mea­sures could mean low­er and few­er inter­est rate hikes next year. This would be good news for risk-on assets such as tech stocks and cryp­to, which have all been bat­tered this year.

With all of the lever­age wiped out of cryp­to mar­kets, only the hard­core hodlers and those with full con­vic­tion remain.

Bit­coin has reclaimed $17K this week, and Ethereum has topped $1,300 again, so a longer-term trend change could be start­ing to form. How­ev­er, there is unlike­ly to be a full bull mar­ket until some­time lat­er this year when reg­u­la­tions are ironed out, and insti­tu­tions return to the asset class.

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