Figuring out the size of an ongoing bear market is extraordinarily troublesome to do with a single metric, particularly when taking a look at brief time frames. To higher perceive an ongoing bear market, one should zoom out and contemplate how varied market fundamentals functioned in earlier cycles.
Typically ignored however stable market efficiency indicators are lively addresses and entities. Energetic addresses characterize the variety of distinctive Bitcoin addresses that both despatched or acquired a transaction. Alternatively, lively entities are a cluster of addresses managed by the identical community entity that have been lively both as a sender or a receiver.
CryptoSlate used superior heuristics and Glassnode’s proprietary clustering algorithms to estimate the variety of lively entities.
These two metrics are stable indicators to gauge whether or not the market has entered its bearish part, displaying what number of customers are interacting with the community.
Analyzing the connection between Bitcoin’s value and the community’s lively addresses and entities reveals three distinct bear market cycles prior to now 5 years — the primary between 2018 and 2019, the second between 2019 and 2020, and the third between 2020 and 2021.
In 2017, the Bitcoin community had 1.19 million lively addresses. In 2021, that quantity grew to 1.24 million, which means that solely 50,000 new lively addresses have been added to the community. Whereas this would possibly look like a low quantity relative to the general rise in Bitcoin adoption, it’s necessary to notice that there have been solely 523,000 lively addresses within the 2018 cycle. Within the 2020 cycle, there have been 640,000, whereas the 2021 cycle had 746,000 lively addresses. A slight 4% uptick in on-chain exercise was solely seen throughout peak bull run occasions corresponding to those we’ve seen in 2017 and 2020.
Analyzing Glassnode knowledge reveals an attention-grabbing phenomenon available in the market — every bear market creates a brand new excessive within the variety of lively addresses and entities. This reveals that the customers drawn in by the bull market are driving out the bear market and resuming their exercise as soon as circumstances enhance.
Nonetheless, there hasn’t been a big inflow of latest customers within the present bear cycle. This means that we’ll proceed seeing the continuation of this bear cycle till macro circumstances change for the higher.