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This is the strangest bear market yet. It seems most people were prepared for it, even though the death spirals and Chapter 11 bankruptcies came out of nowhere. In any case, every coin is in the red. The market should be in a state of fear, uncertainty and doubt. That is certainly not the case for the two leading cryptocurrencies. Circumstances may be different for each, but both markets are showing signs of unshakable conviction.
Long-time holders of bitcoin and ethereum seem to be smiling in the face of the bear market. In the latest edition of The Wolf Denthe author uses the data from Glassnode and Intotheblock to show us how this is true.
The bear market vs. Bitcoin
“Glassnode on-chain evidence suggests there has been no meaningful reduction in long-term believers’ persuasion,” the newsletter states. To prove this, The Wolf Den looks at the ‘Dormancy Metric’. The number that “tracks the average age of each Bitcoin that moves, determined by when it was mined. One of the ways to measure the sentiment of long-term holders is to assess the average age of coins moving around the market.”
As attentive readers might suspect, the coins that are “moving around the market” are extremely young. Their age “is even at a multi-year low. The resting value is very low.” This is in line with previous bear markets, where resting values are typically low.The newsletter cites analysis from Glassnode:
“The decline in longevity metrics actually bodes well for the longer term, as it indicates that old coins are stationary and falling prices have little psychological impact on this cohort’s persuasion.”
So everything looks where it’s supposed to be when we focus on the big picture. A healthy habit during bear markets.
BTC price chart for 09/02/2022 on Cexio | Source: BTC/USD on TradingView.com
The Ethereum merger is imminent
For this section, The Wolf Den used data from IntoTheBlock. Before going into it, the author clarified the sequence of events that make up the mythical “merger”. First of all, on September 6, “the Bellatrix upgrade will take place on the Beacon chain”. Then between September 10 and 20, “the official transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) will take place”. The Ethereum Foundation estimates that the merger will take place on September 15.
To evaluate the state of the Ethereum network during this bear market, The Wolf Den examined “net flows on centralized exchanges”. In general, more ETH is leaving the exchanges than coming in, which is bullish. It usually means people don’t want to sell their assets. But with the merger approaching and the bear market among us, it could have other meanings.
On the one hand, people can be “bullish about the merger because users believe the merger will happen successfully and are charging ETH for possible price action.” On the other hand, they may anticipate the possible ETH Proof-Of-Work Hard Fork. If that happens, “all ETH held in portfolios can claim ETHW in a 1:1 ratio, traders can prepare to claim most ETHW.”
Another curiosity about the current state of the bear market is this. Lately, “the average size of inflow transactions is generally larger than its outflow counterpart”. According to The Wolf Den, this is not a problem because the ‘net flows to centralized exchanges’ are low. And that’s a stronger indicator. However, those large influx transactions may suggest something meaningful. “Larger traders and institutional investors are more skeptical about the success of the merger”.
In any case, long-term bitcoin and ethereum holders are showing unwavering conviction despite bear market conditions. For completely different reasons.
Featured Image by congerdesign from Pixabay | Charts by TradingView