Bitcoin’s and the overall market ongoing downtrend has propelled many discussions with experts contemplating whether the king coin has forayed into the bear territory or not. One such analysis is a report published by prominent data platform Glassnode where it attempted to establish the possibility of BTC entering into a prolonged bear market using key metrics such as Net Unrealised Profit/Loss, MVRV Ratio, Short-Term Holders, etc.
The report first takes on one of the primary bear indicators i.e the Net Unrealised Profit/Loss [NUPL] which depicts the broader market profitability as a proportion of the market cap. NUPL as per the report is trading at 0.325. Noting a stark contrast to the much higher profitability values of 0.75 posted in March, and 0.68 set in October 2021.
The report then refers to previous cycles where low profitability is normal in the early to mid-phase of a bear market [orange], pointing out that based on this observation, a bear market has started in May 2021.
Next, it takes into account the MVRV Ratio that helps identify periods of high, and poor investor profitability. As per the report, the current MVRV-Z stands at 0.85, signaling that the market is well within bearish territory, and bearish divergence is noted, similar to the NUPL metric mentioned above.
In terms of supply dynamics, the Short-Term Holders are currently holding nearly 18.3% of the Bitcoin supply [excluding coins held by exchanges]. The light red area shown in the chart below represents the proportion that is currently held at a loss, ‘and as of this week, almost the entire STH supply is underwater’, it added.
Bitcoin Final verdict
Summing up the report looks into the coin volume observing that a rising, and large proportion of mature coins in some cases indicates that the asset is heading towards a bear market, a time when only the HODLers and patient accumulators remain.
Without mentioning directly Glassnode through its analysis of the on-chain metrics did indicate the possibilities of Bitcoin embarking on a prolonged downtrend but stated that ‘bulls need to step up in a big way else the probabilities favor the bears.’