Recently, bitcoin has suffered a sell-off, which has led to the virtual currency’s value falling more than 20% from its previous all-time high this month.
As a result of this decline, tech journalist Ryan Browne published an article on CNBC in which he claimed that cryptocurrency had entered a market.
“Bear markets are explained through a drop of 20% or more from recent highs,” their article said.
Browne wasn’t alone, as Kate Rooney, a CNBC tech reporter, said the same day that bitcoin’s 20% drop from its all-time high had “officially” placed the cryptocurrency in “bear market territory. “
[Editor’s note: Investing in cryptocurrencies or tokens is highly speculative and the market is largely unregulated. Anyone contemplating this will be willing to lose their entire investment. ]
It would seem that those hounds have relied on a more classical definition of a bear market, representing a drop of at least 20% from a recent high.
However, this definition does not paint for bitcoin, according to several market experts who contributed to this article.
“Traditional definitions of bull and bear markets are inconsistent with crypto value action,” said Amber Ghaddar, co-founder of decentralized capital marketplace AllianceBlock.
“In cryptocurrency markets, falls of more than 20% occur and are occasionally a component of a correction followed by a broader accumulation. Throughout 2016 and 2017, we had six corrections of more than 30%,” he said.
Sylvia Jablonski, co-founder and chief investment officer of Etf Defiance’s ETF sponsors, presented a review.
“Bitcoin has fallen 20% from its all-time high, which in global inventory correlates with a bear market. However, this does not apply to bitcoin,” he said.
“Bitcoin and cryptocurrencies (every 14,000 and more!),” Jablonski said.
Nick Mancini, a research analyst at Trade The Chain, a crypto sentiment data provider, also commented on the situation.
“To say that Bitcoin is in a market at the moment it falls by 20% is incorrect,” he said.
“Bitcoin is inherently volatile due to its limited source (the available source is much smaller than the general source), the lack of centralized authority, and its 24/7 foreign trading hours. These are new concepts that They are not being replicated in the classic money sector, “he said.
The market watcher talked about the mental state of investors.
“Bitcoin sentiment has now returned to the levels we saw before Omicron’s announcement, to our own knowledge, and the value has already returned to about $59,000. “
“If it were a Bitcoin bear market, I’d say it’s the shortest ever. “
The following chart illustrates the evolution of market observer sentiment, with hourly tracking:
Defining a Bitcoin Bear Market
When he came here to find out what precisely constitutes a bear market for bitcoin, market analysts were unable to reach a consensus.
“There is no general rule, because this asset of elegance is too young and ancient knowledge is too scarce,” Ghaddar said.
“Looking at Bitcoin, we can expect to enter a bear market when the replacement value is greater than 20% and the values return within 3 months to the past high. “
Mancini also presented his perspectives on the subject.
“Bitcoin’s volatility creates difficulties in applying classic long-term trend measurement strategies,” he noted.
“Bitcoin is an asset that, on several occasions, has fallen more than 70% from an all-time high and, over time, has risen to above record levels. “
Jesse Proudman, co-founder and CEO of Crypto-robo-advisor Makara, summed it up well:
“A cryptocurrency market is like the offside rule in football : it’s hard to define, but you know it when you see it,” he said.
“We don’t think we’re in a bear market right now, and our outlook remains optimistic at least through the end of the year. “
Disclosure: I bitcoin, bitcoin cash, litecoin, ether, EOS and soil.