Crypto Winter is here as markets dip below $1 trillion, altcoins and DeFi crash as lender Celsius halts withdrawals, billions in overextended leverage trades are wiped out, and fearful forced sellers flood the market with cheap Bitcoin.
Crypto Winter is here: how to survive a bear market
Usually, we cover the top three biggest stories in the space in our fortnightly foray into the fascinating (and sometimes maddening) world of crypto and blockchain. This time around, there's only one real story. Crypto Winter is here.
However, there are a lot of moving parts to this market and indeed this story, so don't expect just a cursory couple of paragraphs on the state of the cryptoasset sector.
A 'Crypto Winter', for the uninitiated, is a period characterised by a precipitous plunge in spot market prices, along with souring sentiment in the most speculative and frothy parts of the market. The last Crypto Winter occurred between late 2017 and late 2018, when the price of Bitcoin dropped a total of 84%. As the cycle plays out, both short-term and long-term holders feel significant pain, pulling liquidity and capital away from markets. Trading volumes fall, with many months of sideways or bearish movement.
More bullish conditions of Crypto Spring and Summer naturally follow. As such, these spells are considered necessary for the evolution of the space as they cleanse it of projects that hold no real utility or innovation. Ethereum co-founder Vitalik Buterin has said markets should “ welcome ” each Winter for these reasons.
So. Markets have fallen under $1 trillion total market cap for the first time since April 2021.
Cryptoasset prices are particularly vulnerable to shifts in sentiment. As a nascent asset class, newly clued-up investors are entering the space all the time. Many of these newbies buy their first Bitcoin or Ethereum on euphoric uptrends and panic sell at a loss when conditions worsen.
Anyone hoping that Bitcoin's rangebound trading around in a tight $28k to $31.5k spread would yield an upside shift has been sorely disappointed. Readers likely already know about the other red flags and recession/stagflation warning signs on the horizons for investors more broadly.
The Bank of England saying its largest lenders are no longer 'too big to fail'
Last but not least, the 2-year/10-year yield curve on US Treasuries has inverted for the second time this year. This is a leading indicator of recession and has preceded every major American downturn since the 1970s. In normal times, higher yields should be offered on the 10-year as opposed to the 2-year to account for the opportunity cost and risk premium for investors to hold longer-dated bonds.
Barclays analysts have now said what many other financial institutions have been thinking: the Fed will need to hike rates by 75 basis points (bps) rather than the 50bps that markets have priced in.
Central banks are out of monetary firepower, having religiously flooded markets with cheap cash in the insane ‘infinite QE' experiment . Stocks and bonds have been demolished, the S&P 500 is officially in a bear market and no-one has a good word to say about any investable asset class. A perfect storm of rocketing inflation, record energy prices, major economies shrinking, and a world system both saddled by debt and watching liquidity vanish has pushed world markets to a brittle cliff edge.
Crypto stocks, too, have been crushed, with many down 75% from the start of the year. Major players have been forced to either freeze hiring or in the case of Coinbase, rescind job offers to Wall Street banking and software development staff keen to hop the fence and join the financial revolution. In recent days both Coinbase and lender BlockFi have shed around a fifth of their workforce as conditions worsen and token prices crash.
Crypto markets are in a state of panic.
On 14 June, the Bitcoin Fear and Greed (F/G) Index hit an equal low record of 8 out of 100. This multi-factor indicator measures sentiment in crypto markets. It dropped below 20 on 8 May 2022, signalling extreme fear, and has stayed there ever since. The only comparable relentlessly bearish period of sentiment on record is March to April 2020.
Normally, periods of low market mood last only a couple of days at a time, followed by relief rallies or strengthened periods of accumulation. In periods of peak euphoria, these figures are in the 80s and 90s. In the November 2020 to early January 2021 bull run, when Bitcoin soared from $15k to $35k, the F/G Index remained above 90/100 for 66 days straight.
We wrote in early May how monthly average RSI - a momentum indicator - was at its lowest point in years, marking Bitcoin as clearly oversold. Those figures have not improved as we head towards the end of Q2 2022.
Diversification and position sizing will be the way out. Sometimes the only difference between medicine and poison is the dosage. Dollar-cost (or pound-cost, or euro-cost) averaging into positions on weakness is the clearest way to survive a bear market. Below, we'll also detail why Bitcoin is objectively cheap right now.
Celsuis stops withdrawals as $1.2bn leverage wiped out
Sentiment was already struggling in the face of a 50%+ drawdown from November's speculative run up to a Bitcoin $68.7k all time high. Markets were bruised but looking resilient after the Terra-induced collapse of mid-May.
Then the Celsius news hit. One of the world's largest crypto lenders made the shock announcement on 13 June it was halting all withdrawals, swaps and transfers between accounts, citing “extreme market conditions”.
The rumour mill started whirring almost immediately. On Twitter, independent analyst Brad Mills suggested that Celsius was now struggling under the weight of its own debts.
Within a matter of hours, the market leading lender Nexo had swooped in with a buy offer for Celsius' collateralised loan portfolio. For anyone who noticed, this was an object lesson in how to make distressed assets work to your advantage. In the coming Crypto Winter there will likely be many such consolidations and buyouts, as heavily leveraged forced sellers are taken out by better-capitalised rivals. I can certainly see the same happening in the fragmented Bitcoin mining space, with so many publicly-listed companies having taking on large amounts of debt to fund ASIC machine purchases, land buys, staff hiring sprees or other growth.
It's going to get very ugly for leveraged traders in the next few weeks. There will be margin calls aplenty all round, and those are phone calls or emails you really can't ignore.
$1.2bn in leveraged trades, both long and short, have been liquidated on unregulated exchanges in the past 48 hours alone. This exceeds the sharp drops seen around the time of the Terra collapse.
The chart below tracks liquidations in Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Solana (SOL), Ripple (XRP), Cardano (ADA) and Tron (TRX) on the Binance, Huobi, OKEx, FTX, BitMex and Bybit exchanges.
Incidentally, ETC Group research on the 2022 State of Crypto Derivatives details exactly why regulated Bitcoin futures exchanges like Eurex in Europe and CME in the US are a much better value proposition than Binance or other venues that force auto-liquidations when markets move against trader positions.
And with 11 May and 13 June firmly in the record books, we have now witnessed two $1bn+ leveraged liquidation events inside 35 days.
The vast majority of lending and borrowing in DeFi markets is done with altcoins other than Bitcoin.
And while readers may have heard that there are more than 10,000 cryptocurrencies on the market, in reality, most outside the top 200 are thinly-traded, staffed by part-time developers and have followings akin to small venture stocks. There is a large amount of concentration at the top of the tree.
The top five DeFi blockchains, where crypto lending and borrowing takes place, represent 84% of the market. The leader, Ethereum, accounts for 64%, with BNB Chain (formerly, Binance Smart Chain (BSC)) in distant second with 8% market share.
TVL, or Total Value Locked, measures how much crypto is locked in smart contracts that allow lending or borrowing in DeFi. TVL sank to less than $80bn as of 14 June from a high of $217bn in December last year.
Some early predictions for the rest of 2022 are a continuation of what we said in our last market update. It will be a Darwinian process as to which blockchains survive. Market leaders like Bitcoin and Ethereum have massive network effects that set them way out in front. Poorly-maintained or underdeveloped meme coins - we're looking at you, Dogecoin (DOGE) and Shiba Inu (SHIB) - whose position in the top 20 cryptos by market cap is still a mystery, won't survive an extended bear market.
Fear Mode reigns but Bitcoin objectively cheap
Historically, the largest gains have been made from scaling in buys when other market participants become forced sellers. This might not be what current holders witnessing large paper losses want to hear right now. And finding the right time to pile in and feast on weakness is tricky.
One key on-chain metric we follow to determine a fair value for Bitcoin is called Net Unrealised Profit and Loss (NUPL). NUPL estimates whether Bitcoin holders today are in profit or holding at a loss, and as such is a really useful signal for whether markets are cooling or overheating.
The below chart splits the market into five distinct zones, depending on the number of Bitcoin holders with unrealised profits or losses. Higher percentages where prices are trending up suggest highly bullish or euphoric markets. At these times it has been historically more valuable to take profits. Lower percentages where prices are trending down suggest highly bearish markets where it has been historically more valuable to accumulate crypto.
Net Unrealised Profit/Loss zones
NUPL 75-100% : Euphoria (trending up) or Greed (trending down)
NUPL 50-75% : Belief (trending up) or Denial (trending down)
NUPL 25-50% : Optimism (trending up) or Anxiety (trending down)
NUPL 0-25% : Hope (trending up) or Fear (trending down)
NUPL below 0% : Capitulation
Bitcoin markets today are currently in the Fear zone. Capitulation, where the highest-conviction holders also sell, comes when NUPL drops below 0%. We are not there yet.
The data is derived from this equation : Bitcoin market cap, minus Bitcoin realised cap, divided by Bitcoin market cap. Adamant Capital created the indicator in 2019.
Bitcoin market cap you already know and love: that's the current spot price of Bitcoin ($22.8k at time of writing) multiplied by the number of BTC in circulation (just over 19 million ).
Realised cap may be new to you. This takes the average price of each bitcoin when it was last moved from one wallet to another, then multiplied by the number of BTC in circulation. That's the brilliant thing about blockchains: they are so much more open than other forms of currency. We can actually see - for free - when each bitcoin was last used! Try doing that with GBP or USD.
The most obvious recent capitulation point to compare with was ‘Black Thursday': 12 March 2020, when the price of Bitcoin almost halved overnight . The same area of the market - poorly-understood high-yield DeFi products - was to blame then, as retail investors got boxed into collateralised debt obligations which triggered cascades of auto-liquidation as prices moved against them.
The same appears to be happening again. Sellers are selling now not because they want to, but because they have to.
Whether that's overextended retail looking to cash out quickly (and because crypto markets are an ATM for quick cash, instead of the T+2 it takes for stocks and shares), or corporates and traders trying to meet margin calls, few people selling Bitcoin or Ethereum today are doing so from a position of profit. If they are, why now? Why not four months ago, when we hit peak euphoria?
If Bitcoin breaks below $20k the next major support level for the world's first cryptocurrency lies between $15K and $18k.
Those with capital to spare could feast on opportunity here and stack crypto at firesale prices, while those who are overleveraged will likely continue to run for cover.
Markets
As of 14 June 2022, markets are trending downwards from fear towards capitulation. Dampening sentiment pervading the crypto market has seen Bitcoin breach a key macro low of $28,000 and fall to its lowest price since December 2020. Bitcoin is now attempting to consolidate within the $21,000-$23,000 range after shedding 27% of its value since the opening of June.
Ethereum too has dropped to a major level of support and is currently hovering around the $1,200 mark. Since 31 May Ethereum has declined by 37% despite making advances in its race to switch to Proof of Stake after its successful Ropsten testnet merge.
Ostensible “Ethereum killers” Solana (SOL), Avalanche (AVAX), and Cosmos (ATOM) have not escaped either. Each of these Layer-1 blockchains has lost more than 34% of its value in the last 14 days with crypto investors scrambling to find refuge.
With a 21% decline across the last 14 days Cardano (ADA) takes the prize of least bad performer. It currently sits at $0.49 – still a far cry from the all-time-high of $3.09 it hit in September 2021.
WICHTIGER HINWEIS:
Dieser Artikel stellt weder eine Anlageberatung dar, noch bildet er ein Angebot oder eine Aufforderung zum Kauf von Finanzprodukten. Dieser Artikel dient ausschließlich zu allgemeinen Informationszwecken, und es erfolgt weder ausdrücklich noch implizit eine Zusicherung oder Garantie bezüglich der Fairness, Genauigkeit, Vollständigkeit oder Richtigkeit dieses Artikels oder der darin enthaltenen Meinungen. Es wird davon abgeraten, Vertrauen in die Fairness, Genauigkeit, Vollständigkeit oder Richtigkeit dieses Artikels oder der darin enthaltenen Meinungen zu setzen. Beachten Sie bitte, dass es sich bei diesem Artikel weder um eine Anlageberatung handelt noch um ein Angebot oder eine Aufforderung zum Erwerb von Finanzprodukten oder Kryptowerten.
VOR EINER ANLAGE IN KRYPTO ETP SOLLTEN POTENZIELLE ANLEGER FOLGENDES BEACHTEN:
Potenzielle Anleger sollten eine unabhängige Beratung in Anspruch nehmen und die im Basisprospekt und in den endgültigen Bedingungen für die ETPs enthaltenen relevanten Informationen, insbesondere die darin genannten Risikofaktoren, berücksichtigen. Das investierte Kapital ist risikobehaftet und Verluste bis zur Höhe des investierten Betrags sind möglich. Das Produkt unterliegt einem inhärenten Gegenparteirisiko in Bezug auf den Emittenten der ETPs und kann Verluste bis hin zum Totalverlust erleiden, wenn der Emittent seinen vertraglichen Verpflichtungen nicht nachkommt. Die rechtliche Struktur von ETPs entspricht der einer Schuldverschreibung. ETPs werden wie andere Wer
Über Bitwise
Bitwise ist einer der global führenden Krypto-Vermögensverwalter. Tausende von Finanzberatern, Family Offices und institutionellen Anlegern auf der ganzen Welt haben sich mit uns zusammengetan, um die Chancen von Kryptowährungen zu erfassen und zu nutzen. Seit 2017 hat Bitwise eine beeindruckende Erfolgsbilanz vorzuweisen bei der Verwaltung einer breiten Palette von Index- und aktiven Lösungen für ETPs, separat verwalteten Konten, Privatfonds und Hedge-Fonds-Strategien - sowohl in den USA als auch in Europa.
In Europa hat Bitwise (vormals ETC Group) in den letzten vier Jahren eine der umfangreichsten und innovativsten Produktfamilien von Krypto-ETPs entwickelt, darunter Europas größtes und liquides Bitcoin-ETP. Diese Produktfamilie von Krypto-ETPs ist in Deutschland domiziliert und von der BaFin zugelassen. Wir arbeiten ausschließlich mit renommierten Unternehmen aus der traditionellen Finanzbranche zusammen und stellen sicher, dass 100 % der Vermögenswerte sicher offline (Cold Storage) bei regulierten Verwahrern gelagert werden.
Unsere europäischen Produkte umfassen eine Palette von sorgfältig strukturierten Finanzinstrumenten, die sich nahtlos in jedes professionelle Portfolio einfügen und ein ganzheitliches Exposure zur Anlageklasse Krypto bieten. Der Zugang erfolgt unkompliziert über die wichtigsten europäischen Börsen, wobei die Hauptnotierung auf Xetra erfolgt, der liquidesten Börse für den ETF-Handel in Europa. Privatanleger profitieren von einem einfachen Zugang über zahlreiche DIY-Broker in Verbindung mit unserer robusten und sicheren physischen ETP-Struktur, die auch eine Auszahlfunktion beinhaltet.
Please confirm the following selection to access the content relevant to you:
Cookie Settings
We use cookies on our site to optimize our services.Learn more
We use cookies on our site to optimize our services.Learn more
Required cookies
These cookies are necessary to ensure the smooth functioning of this website (e.g. session cookies, cookie to store the selected cookie preferences, etc.). These required cookies can thereforce not be deactivated.
Optional cookies
Functional cookies are used to ensure the smooth functioning of all tools on the wesites. The entire and proper function of the webite is available to the user only with the use of functional cookies. The use of analysis cookies serves the ongoing quality improvement of this website and its content. By using them, wa aim to maximise user satisfaction.
Avis Important
Des produits tels que BTCE - ETC Group Physical Bitcoin ("BTCE") sont des Exchange Traded Commodities ("ETC"), instruments financiers considérés comme des titres de créances complexes par l'Autorité des Marchés Financiers présentant des risques difficilement compréhensibles par le grand public. A ce titre, leur distribution en France répond à des règles spécifiques. Il relève de la responsabilité des intermédiaires et investisseurs professionnels souhaitant offrir des ETCs à leurs clients de s'assurer que leur distribution auxdits clients est réalisée dans le respect de la réglementation française.
Terms of website use
Important Notice
Please read these terms carefully before using this website. By clicking on “Accept” and by accessing the website on an ongoing basis, you are deemed to have read, understood and accepted these Terms of Website Use.
The distribution of the information and material on this Website may be restricted by law in certain countries. None of the information is directed at, or is intended for distribution to, or use by, any person or entity in any jurisdiction (by virtue of nationality, place of residence, domicile or registered office) where publication, distribution or use of such information would be contrary to local law or regulation. By clicking on “Accept” and by accessing the website on an ongoing basis you attest that you are a professional investor or are otherwise allowed to access this website pursuant to all applicable laws.
You must not use or attempt to use any automated program (including, without limitation, any spider or other web crawler) to access our system or in relation to this Website.
We may change these Terms of Website Use from time to time. Any changes we may make will be posted on this website. By continuing to use and access this website following such changes, you agree to be bound by any changes we make. Please review this page frequently to see any updates or changes to these Terms.
If you are in the UK, US or Canada
Information available on this website is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering in the United States, to, or for the account or benefit of, any U.S. Person or in Canada, or any state, province or territory thereof, where neither the Issuer nor its products are authorised or registered for distribution or sale and where no prospectus of the Issuer has been filed with any securities regulator. Neither this website nor information it contains should be accessed by a US person or legal entity or taken, transmitted or distributed (directly or indirectly) into the United States.
This document does not constitute an invitation or inducement to engage in investment activity. In the UK, this document is provided for information purposes and directed only at investment professionals (as defined under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended from time to time). It is not intended for use by, or directed at, retail customers or any person who does not have professional experience in matters relating to investment in cryptocurrencies and crypto-backed ETPs. Neither the Issuer nor its products are authorised or regulated by the UK Financial Conduct Authority.
No advice
Nothing on this website should be considered to be investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. All investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
The information on this website is provided for information purposes only. The fact that ETC Group has provided it does not constitute investment advice or a recommendation to buy or sell any particular product or to engage in any other related transaction. The products involve a high degree of risk and are not necessarily suitable for everyone. The products presented in this section of the website are intended for sale only to sophisticated investors who are able to understand and bear the risks involved. They may not be suitable for you.
In preparing the information in this section of the Website, ETC Group has not taken into account your individual investment objectives, financial situation or investment needs. Nothing in the website constitutes or is intended to constitute financial, legal, accounting or tax advice. Neither ETC Group or any affiliate will provide or purport to provide you with investment advice as a result of your use of this website. Accessing this website does not create any contract whereby ETC Group agrees or undertakes to provide you with any information or investment advice. The information on this website is provided solely on the basis that you will make your own investment decisions.
Limitation of Liability
Neither ETC Group nor any of its affiliates, directors, officers or employees shall be responsible or will be liable for any loss or damage including consequential or indirect damage or loss of profit, arising in any way from the use of, or inability to use, this website or any reliance placed on the information it contains. The website is provided on an "as is" basis. Whilst we take all reasonable care to ensure the information published on this website is up to date and as accurate as possible, ETC Group does not guarantee or warrant that this website, or any services or content on it, will always be accurate, available or provided uninterrupted. We may suspend, withdraw, discontinue or change all or any part of this website without notice. We do not guarantee that this website will be secure or free from bugs or viruses. You agree that your use of this website is at your own risk.
Certain documents made available on this Website may have been prepared and issued by persons other than ETC Group. ETC Group is not responsible in any way for the content of any such documents. The website may also contain hyperlinks to external websites that are not under the control of ETC Group. ETC Group does not approve or endorse the contents of such websites and does not control or take any responsibility for the content of any such websites.
Risk Warnings
Cryptocurrencies and products linked to cryptocurrencies are highly volatile.
You can lose some or all of your investment.
Risks of investing are numerous and include market, price, currency, liquidity, operational, legal and regulatory risks.
Exchange traded products do not offer a fixed income or match precisely the performance of the underlying cryptocurrency.
Investment in cryptocurrencies and products linked to cryptocurrencies are only suitable for experienced investors and you should seek independent advice and check with your broker prior to investing.
All investors should read the relevant base prospectus and final terms contained on this website before investing and, in particular, the section entitled ‘Risk Factors’ for further details of risks associated with an investment.
General
The website is owned and operated by ETC Management Ltd, a company registered in England and Wales under number 12165332 with its registered office at Gridiron, One Pancras Square, London, England, N1C 4AG. You can contact us by email at info@etc-group.com.
References to “ETC Group”, “we”, “us” and “our” in these Terms of Website Use refer to ETC Management Ltd and our affiliates.
All content and the design of this Website are owned by ETC Group or our licensors and protected by copyright and other applicable laws. Any copying of the website or of its content requires the prior written consent of ETC Group.
ETC Group respects the privacy of users. Please see our Privacy Policy for information setting out how we handle personal information collected through the Website.
The products displayed on this website are not available for subscription or purchase by retail investors in your selected jurisdiction. Please contact your broker or financial adviser for further information.
Important Notice:
The distribution of the information and material on this website may be restricted by law in certain countries. None of the information is directed at, or is intended for distribution to, or use by, any person or entity in any jurisdiction (by virtue of nationality, place of residence, domicile or registered office) where publication, distribution or use of such information would be contrary to local law or regulation.
The products on this website are not intended to be offered and shall not be offered to any private investor.
Important information:
The distribution of the information and material on this Website may be restricted by law in certain countries. None of the information is directed at, or is intended for distribution to, or use by, any person or entity in any jurisdiction (by virtue of nationality, place of residence, domicile or registered office) where publication, distribution or use of such information would be contrary to local law or regulation.
If you are a UK professional investor and want more information on the products, please visit www.hanetf.com. For professional investors only. Capital at risk.