Distant threat or inevitable reality?

On average, a crypto bear market lasts for a year, sometimes up to two. This phase occurs when supply exceeds demand, resulting in prolonged price reductions.

One of the most severe bear markets opened in 2022. During this time, FTX, one of the largest exchanges, collapsed following a massive bank run. The collapse led to the collapse of many hedge funds and lending protocols, marking a significant low point for the industry.

Bear Market Psychology Explained.

Recently, the crypto market is rumored to return to a bear phase. Many cryptocurrencies have struggled since Bitcoin (BTC) hit $73,750 in March. The decline raised fears that the market could enter another long-term decline.

This incident, which occurred in a surprising manner before the share, sent shock waves through the market. At that time, many predicted that the price of crypto would reach an all-time high.

However, this did not happen. Instead, the price of BTC, along with other cryptocurrencies, has either been strengthening, falling or engaging in false breakouts.

These factors, among others, have led some participants to suggest that the market is headed for a bear phase. To assess this possibility, BeInCrypto examines market cycle psychology charts for insights.

Read more: How to make money in a bear market

As shown above, this table shows 14 different levels. For example, the reversal marks the end of a bear market when cryptos begin to transition into a bull phase. There are also levels of happiness, anxiety, euphoria or satisfaction.

From the looks of things, the phase of belief occurred around the first quarter of 2023.When the price of Bitcoin begins to post continuous gains. Meanwhile, the “exciting” period may be during the ETF approval in early January this year. As there have been calls for people to double down on buying BTC.

Euphoria will probably peak in March when BTC and many other altcoins and meme coins reach different heights. The recent cold may suggest that this cycle is between calm and depression, which is often preceded by a bear market.

Despite the ETH issues, Bitcoin holders are in big denial about the decline

However, periods of complacency and stress can be false alarms. According to Glassnode, it provides an indication of the sell-side risk ratio of long-term Bitcoin holdings. This metric measures the level of profit taking compared to previous market cycles.

Currently, the ratio is below the peak seen during the 2021 bull market, indicating that long-term bitcoin holders are refraining from selling.

Such actions indicate that there is high confidence among long-term owners. In this regard, the on-chain analytics platform explains the following:

“Higher Bitcoin network assets are held by this investor group in light of the ATH breakouts of the previous cycle, indicating that investors are impatient and waiting for higher prices.”

If this is true, the bear market may not be imminent, and the cycle may still be in the bear phase. However, some market participants are skeptical about the low performance of some altcoins, especially Ethereum (ETH).

In the year In 2021, after Bitcoin reached its all-time high (ATH), ETH quickly followed and surpassed its previous high. This time, however, the situation is different even with the launch of Spot Ethereum ETFs.

Currently, ETH is trading at $2,657, which represents a 45% discount from ATH. Earlier, many market participants confidently predicted that the altcoin would reach between $8,000 and $10,000, but these expectations have not yet been fulfilled.

Some bright predictions have faded as ETH continues to underperform, reinforcing the belief that a bear market is coming to an end. However, it's worth noting that top cryptocurrencies, including BTC and ETH, have had a recent period of circulation, which may have contributed to the recent price correction.

Bears are still waiting for the crypto winter.

Market participants may be worried about the decline in buying crypto currency BTC. However, these pauses are common during the bull cycle. Despite this, caution is advised as indicated by Net Unrealized Profit/Loss (NUPL).

NUPL measures whether investors are in profit or loss. As the reading rises, it indicates that many investors are seeing higher profits. Conversely, a decrease indicates that profits are declining.

This measure also helps to determine whether the market has entered a bear phase. An increase points to a strong bull cycle, while a significant decrease increases the possibility of a bear market.

Read more: Half a story of Bitcoin: Everything you need to know

At the time of publication, the Bitcoin NUPL stands at 0.46. In July, a similar decline in this range pushed the price of BTC down to $55,857. The last time the indicator reached this level, the price of Bitcoin dropped to $42,576.

This makes the current reading a critical point for the market. If NUPL continues to decline and reaches 0.40 or below, the bears can take control. According to Grizzly, a crypto analyst at CryptoQuant, BTC could drop to $40,000 if this happens.

“If the index continues its downward movement, it is reasonable to assume that the bears can completely control the market. In such a case, the price may drop to $40,000,” Grizzly wrote in the analysis.