“A plus for the market.” How long will the lull last for bitcoin?

During 4 months, the rate of bitcoin (BTC) has been staying in a narrow range from $18 000 to $20 000 amid growing volatility in traditional financial markets. Analysts note the possible formation of the bottom of the bear market but also assume the continuation of a period of relative lull without sharp price fluctuations.

Today the market is in the midst of the “crypto winter,” which began with the collapse of the rate in November last year. Approximately, this period can last for a year and a half or two years, so three months of complete lull is more of a plus for the market than a negative factor, says Nikita Zuborev, senior analyst at Bestchange.ru.

If you draw an analogy with the situation in 2017-2020, the three-month interval is relatively small, and the rate can steadily hold at one level and more than six months, accompanied by rare attempts to break the trend. Based on historical data, such stagnation can continue until the middle of next year. “However, a downward or upward shift in the “corridor” within 20-30% of the current range is possible during this time interval, but the absence of high medium-term volatility is likely to be with us for a long time,” sums up the expert.

In the report titled “A Calm Before the Storm” published on October 10, Glassnode's analysts analyzed several indicators showing that investors set the potential lower boundary of the bear market. The situation in the market in many indicators is similar to the lows of the previous cycle, the authors of the report noted.

After analyzing the distribution of coins among long-term and short-term holders, Glassnode concluded that sellers have likely exhausted their options. According to the on-chain analysis, more than 31% of coins held by long-term holders are at a loss. Analysts note that the market has been in this phase for 1,5 months, with previous similar bear market periods lasting 6 to 10 months.

Percentage of long-term BTC holders in loss

Source: Glassnode.com

Network profitability has yet to reach the same severe "financial pain" level as in past cycles. “Blockchain data, market structure and investor behavior patterns suggest a typical bear market. The fundamental element that is missing to establish a bottom is duration,” the report's authors write. Glassnode previously predicted a return of volatility to the crypto market.

What will happen to the price

Only very striking events can noticeably affect the market today, according to Zuborev. “Nothing is on the horizon yet, although such things may happen unexpectedly: large sales of confiscated coins, hacks of crypto exchanges, smart contracts, compromise of crypto methods and second-tier solutions, movements on the oldest wallets, etc. Such events can shift the trading range between $15-$20 or even $10-$15k, depending on the severity of the consequences and open margin positions at the time of the incident,” notes the Bestchange.ru analyst.

“In the next month, I do not expect bitcoin growth, as well as decline,” co-founder of ENCRY Foundation Roman Nekrasov comments, adding that the pressure of bears will definitely increase because at the next meeting the US Federal Reserve is likely to raise the key rate again by 0,75 p.p. According to the expert, the negative scenario, in which bitcoin will decrease in price, is still very probable, but it is unlikely that the fall will lower the price of BTC below $16 000.

Bitcoin is experiencing two opposing pressures at once, Nekrasov said. On the one hand, the price of the first cryptocurrency cannot grow much because of the rising key rate and expectations of recession. On the other hand, high inflation risks encourage investors to look for alternative assets to preserve capital. So, institutional investors keep pouring large sums of money into bitcoin and some other cryptocurrencies and this will not allow the market to fall much, the expert said, specifying that “it won't grow either.”

According to Zuborev, the fourth quarter will be “moderately negative” or neutral for the rate of bitcoin. Most likely, if nothing extraordinary happens, the price of BTC will continue to be in the same range, perhaps increasing the pressure of the bears closer to the end of the year during the Catholic Christmas and New Year, the analyst said.

Nekrasov expects the bitcoin price to fall to $16 000-$17 000 in the fourth quarter. At the same time, in his opinion, BTC will continue trading in the range of $18 000-$22 000 most of the time. According to the head of ENCRY Foundation, the growth of the crypto market is unlikely to begin before the spring or summer of 2023, and its main stage will occur in the summer and autumn of 2023.