The crypto markets have accepted UST de-pegging and the consequent LUNA downward spiral, both of which have impacted the price of Bitcoin and the entire digital asset spectrum. The Bitcoin market has been trading lower for eight weeks, according to a recent study by the Glassnode team, making it the ‘longest continuous set of red weekly candles in history.’
The most popular altcoin, Ethereum, painted a similar picture. Bearish fluctuations have a direct or indirect impact on returns and profit margins.
To make matters worse, derivative markets anticipate further falls in the next three to six months.
Bitcoin Could Face More Pain, According to Derivative Markets
According to derivative markets, the outlook for the next three to six months is for further decline. According to the report, block space demand for Ethereum and Bitcoin has fallen to multi-year lows, and the rate of ETH burning via EIP1559 has reached an all-time low.
According to Glassnode, the demand side will continue to experience headwinds due to poor price performance, uncertain derivatives pricing, and extremely low demand for Bitcoin and Ethereum block space.
According to the report:
Looking on-chain, we can observe that demand for Ethereum and Bitcoin block space has dropped to multi-year lows, and the rate of ETH burn via EIP1559 is now at an all-time low.
When we combine bad price performance, terrified derivatives pricing, and extremely low demand for block-space on both Bitcoin and Ethereum, we may conclude that the demand side will continue to face headwinds.
The price-performance of Bitcoin and Ethereum over the last 12 months has been dismal. As a result, long-term CAGR rates for Bitcoin and Ethereum have been affected.
The largest cryptocurrency, BTC, followed an approximately 4-year bull/bear cycle that was regularly accompanied by halving events. Long-term returns have fallen from about 200 % to less than 50 % as of this writing.
Furthermore, Bitcoin had a negative 30% short-term return, suggesting that it corrected by 1% every day on average. Bitcoin’s negative return is remarkably similar to previous bear market cycles.
When it comes to ETH, the altcoin did significantly worse than BTC. The monthly return profile of Ethereum displayed a bleak picture of -34.9 %. Ethereum appears to be seeing diminishing returns in the long run as well.
Furthermore, over the past 12 months, the 4-year CAGR for both assets fell from 100% to 36% for BTC. ETH is also up 28 % year on year, underscoring the severity of this bear.
To make matters worse, the derivative market predicted market falls in the future. Options markets continue to price in near-term uncertainty and negative risk, particularly for the next three to six months. In actuality, implied volatility surged dramatically during the market sell-off last week.
According to the Glassnode investigation, the current bear market has taken its toll on crypto traders and investors. Furthermore, the Glass node team underlined that in downturn markets, things often become worse before they get better. However, ‘bear markets do tend to end’ and ‘bear markets author the bull that follows,’ so there is some light at the end of the tunnel.