Bitcoin’s bear market is far from over, but data points to improving investor sentiment

2022 was a near-unprecedented twelvemonth of extremes and achromatic swan events for the crypto market, and present that the twelvemonth is astir to wrapper up, analysts are reflecting connected the lessons learned and attempting to place the trends which whitethorn constituent to bullish terms enactment successful 2023. 

The collapse of Terra Luna, Three Arrows Capital and FTX created a recognition crunch, a terrible simplification successful superior inflows and an accrued menace that further large centralized exchanges could collapse.

Despite the severity of the marketplace downturn, a fewer positives person emerged. Data shows semipermanent hodlers and smaller-sized wallets are actively accumulating during this play of debased volatility.

While the marketplace continues to spot red, positives are emerging.

Let’s dive successful connected the affirmative and antagonistic information points.

Low liquidity and losses abound

When liquidity was flooding into the marketplace successful November 2021, BTC terms deed an all-time precocious and investors realized $455 cardinal successful profits. Conversely, arsenic liquidity tightened successful what galore investors hoped were the darkest days of the carnivore market, $213 cardinal successful realized losses led to investors giving backmost 46.8% of the highest bull marketplace profits. The magnitude of the profits versus realized losses is akin to the 2018 carnivore wherever the ratio retraction from gains deed 47.9%.

Yearly sum of realized Bitcoin profits and losses. Source: glassnode

In the thread below, Cumberland, a large liquidity supplier wrong the crypto sector, highlighted the liquidity challenges facing the market.

There are plentifulness of sources of interest for marketplace participants – volumes and liquidity person dried up and are, by assorted metrics, connected the lows of the year. While this could beryllium a vacation phenomenon, sentiment is acheronian –

— Cumberland (@CumberlandSays) December 12, 2022

According to Cumberland, the constricted liquidity is simply a effect of large-scale capitulations, leaving bankrupt firms with nary remaining coins to sell.

CoinShares investigation of play money flows besides showed CoinShares trading volumes reaching a caller 2-year debased of $677 cardinal for the week. The debased trading volumes are coupled with crypto funds flowing retired of integer assets, further hampering imaginable upside.

Crypto money flows arsenic a percent of money AuM. Source: CoinShares

Historically, centralized exchanges person been a root for fiat onboarding which helps bring much superior into the crypto plus space. Due to regulatory concerns and CEX fears, bringing successful caller funds has go challenging.

While the supra information is precise bearish, the marketplace besides has immoderate information points that whitethorn constituent to a reversal.

Minimal improvements successful capitalist sentiment appears

While traders are hoping for a affirmative Federal Reserve meeting to reverse the short-term bearish trend, determination are on-chain information points that amusement sentiment making immoderate marginal improvements.

CoinShares states that adjacent with CEX fears and smaller volumes, inflows are improving:

"Bitcoin saw inflows totalling $17 million, sentiment has been steadily improving since mid- November with inflows since past present totalling $108 million."

While these numbers are not groundbreaking, Bitcoin’s debased volatility offers investors an accidental to dollar-cost mean and await a imaginable inclination reversal. Current volatility is astatine multi-year lows for Bitcoin (BTC), reaching figures past witnessed successful October 2020.

Realized Bitcoin volatility. Source: glassnode

Record lows successful volatility is coupled with a caller all-time precocious successful semipermanent Bitcoin hodlers cohort. Even arsenic the terms of BTC remains successful a downtrend, 72.3% of each circulating Bitcoin proviso is present successful the hands of semipermanent hodlers.

Total Bitcoin proviso held by semipermanent hodlers. Source: glassnode

Glassnode notes that information shows:

“The adjacent linear uptrend successful this metric is simply a reflection of the dense coin accumulation that occurred successful June and July 2022, instantly aft the deleveraging lawsuit inspired by 3AC and failing lenders successful the space.”

Adding to this perspective, erstwhile BitMEX CEO Arthur Hayes believes Bitcoin has bottomed aft a fistful of bankruptcies flushed irresponsible entities from the space.

While the uptick successful sentiment and organization capitalist inflows are not important capable to trigger a inclination reversal, the affirmative information points amusement immoderate signs of recovery.

The views, thoughts and opinions expressed present are the authors’ unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.