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Indicators Suggest Bitcoin Bear Market May Continue Through 2023


The last days of 2022 provide another extremely low reading for on-chain indicators, especially for Bitcoin. In today’s analysis, BeInCrypto looks at the on-chain cost basis and realized market capitalization.

Some on-chain metrics give hope that the bottom of the ongoing bear market has already been reached. On the other hand, others suggest that the final capitulation is yet to come and that the macro bottom will not appear until 2023.

Today’s on-chain analysis leans more towards the latter narrative, as two prominent Bitcoin market metrics have yet to show signs of a rebound. Although the cost base and realized market capitalization are extremely low today, there is no sign of their bullish reversal yet.

Cost base falls below $20,000

Investors use the cost base in the Bitcoin market, similar to traditional markets, to determine the profitability of their investment. They calculate capital gains or losses by comparing the selling price to the buying price. Calculating the cost basis in the Bitcoin market requires using on-chain data and weighting the BTC price by the 30-day percentage change in the realized price.

A chart of such an indicator, called the On-Chain Cost Basis, was recently posted on Twitter by a well-known analyst. @DylanLeClair_. He points out that this metric just fell below the psychological level of $20,000.

Source: Twitter

Additionally, on the color chart, we see that for most of 2022, the on-chain cost basis was in a bearish red range. According to the analyst’s interpretation, the down range corresponds to values ​​below 0%. In contrast, the yellow (neutral) range is 0-10% and the bullish (green) range appears when the 30-day percent change is greater than 10%.

In the past 5 years, only in two previous periods has Bitcoin price fallen below its on-chain cost base. The first time occurred at the end of the bear market and during the subsequent accumulation of 2018-19. The second – a much shorter period of extreme lows – was the March-April 2020 COVID-19 crash.

Declining Bitcoin Cost Base Since June 2022

It should be mentioned that at the beginning of June 2022, the cost base of Bitcoin was not so low. In an analysis conducted at the time, BeInCrypto noted that the cost base of long-term hodlers was always well above their purchase price. Short-term investors were already overwhelmed at the time.

However, shortly after this analysis, the price of BTC fell to a low of $17,622 and the situation definitely got worse. In contrast, in the current market situation, with BTC hitting a low of $15,476 on November 21, the vast majority of cryptocurrency market participants are in the red.

Lowest realized relative market capitalization on record

The reason the on-chain cost basis is at extremely low levels today is the decline in realized market capitalization. This metric values ​​different parts of the supply at different prices (instead of using the current daily close). The cost basis is specifically calculated by valuing each UTXO based on the price it last moved at.

In the chart below, we see that there has been a systematic and very steep decline in capitalization realized since the end of April 2022. In fact, never before in the history of Bitcoin has the decline been so intense. It is currently reaching values ​​last seen in August 2021 at $382 billion.

Source: Glassnode

Based on this extreme drop, @DylanLeClair_ tweeted another chart. It shows how deep the relative decline in realized market capitalization is. On December 27, 2022, it reached up to -18.32%. This is the lowest level in history.

In previous bear markets, the relative decline was around minus 14-16% at its lowest points. If this trend does not reverse soon, we can still expect a decline in Bitcoin prices in 2023.

Source: TwitterFor the latest crypto market analysis from BeInCrypto, Click here.


BeInCrypto strives to provide accurate and up-to-date information, but it will not be responsible for missing facts or inaccurate information. You comply and understand that you must use this information at your own risk. Cryptocurrencies are highly volatile financial assets, so do your research and make your own financial decisions.



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