Did Bitcoin enter a bear market before the decline?

In the days leading up to Bitcoin's halving, the cryptocurrency market experienced a sharp decline, raising concerns about a bear market.

Bitcoin saw a 19 percent drop in value, while altcoins faced steeper declines, with some down as much as 70 percent. This trend has sparked debate among investors about the immediate future of cryptocurrencies as the halving approaches.

Bitcoin and Altcoins Nosedive Before the Decline

Historically, bitcoin halvings — the proposed reduction in rewards for new blocks — have been a market sensation. The event effectively reduces the supply of new BTC, which in theory should increase its price if demand is constant.

However, Sentiment market analyst Gary Kabankin told BIncrypto that the market doesn't just operate on fundamentals, especially around significant events like this. The recent price correction in Bitcoin and altcoins may reflect a natural market reaction to speculative forecasts rather than fundamental declines in price.

Indeed, current market conditions reflect a speculative trading environment driven by a halving.

“The steep fall in altcoins, even more so than bitcoin, highlights the high volatility and speculative trading that precedes such events. The block reward reduction after the halving is a reminder of the market's sensitivity to volatile changes where supply pressures are expected to decrease.”

Kabankin explains that looking at mining characteristics, such as the scale of mining operations and overall supply changes, can provide additional insights. A decrease in miners selling their assets prior to completion may indicate a pessimistic view that they expect higher prices after the event.

However, the exact impact of the cuts will only become clear in the coming weeks. As the market adjusts to the new supply volume, the implications for Bitcoin scarcity and value are understandable.

Read more: Bitcoin price prediction for 2024/2025/2030

The ongoing decline is somewhat typical of the cyclical nature seen around previous halves. Basically, waiting follows speculative runs and corrections. However, Kabankin points out that, given the current chain parameters and social sentiment, stereotypes are important.

“Historically, we've seen happiness around half-happiness, which often results in the evaluation of places after the event. Monitoring social sentiment and whale behavior is critical for more rapid market direction signals,” added Kabankin.

Moreover, the market-value-to-real-value (MVRV) ratio gives a clear view of market sentiment. At any time, it indicates that the property is obsolete or undervalued. According to Kabankin, investors should closely monitor the age of the average coin. Significant drops can indicate movement and potential selling pressure, indicating broader market changes.

These indicators, combined with traditional support levels from technical analysis, can guide investors through uncertain times.

Kabankin believes investors should pay attention to social sentiment and chain metrics to spot a potential bull run again. A decrease in fear, uncertainty, and doubt (FUD) coupled with an increase in fear of missing out (FOMO) often precedes market improvement.

Additionally, a significant increase in stablecoin supply could signal readiness for action as exchanges move, suggesting bullish sentiment. Also, an increase in trading volume may indicate increasing support for the trend. It may suggest a more healthy build for a bull run.

“Watching resistance barriers and on-chain signals is critical to spotting potential changes. One key metric to look at is the average dollar invested over time, especially when it starts to decline, which can indicate that previously dormant tokens are on the move, indicating that market sentiment may be changing,” Kabankin emphasized.

As the crypto market remains highly volatile, these signals are crucial for predicting the next move. The post-Bitcoin historical pattern has often fueled altcoin cycles. This is a direct result of investors looking for higher returns beyond the initial spike in Bitcoin. As recent volatility changes and moves across the chain suggest building, another cycle may be on the horizon.

Read more: What Happened in the Last Half of Bitcoin? Predictions for 2024

The excitement around altcoins, as indicated by social metrics and transaction volumes, reflects a growing appetite among investors. However, it is important to keep a close eye on these trends as rapid changes can occur in the cryptocurrency markets.