Research: 2022 Bear Market Compared to 2018

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Not all bear markets are created equal and the same can be said when comparing the crypto bear market of 2018 and the current bear market of 2022.

BTC balance change 2018-2019

bitcoin exchange net position change
Bitcoin – Net Exchange Position Change – All Exchanges (Source: Glassnode)

Following the peak of the bull run in December 2017, the price of Bitcoin (BTC) fell below $10,000, and what followed from January 2018 to Q4 2019 was a large influx of BTC onto exchanges. .

Starting with around 1.7 million BTC on the exchanges in January 2018, by the end of 2019 the exchanges had approximately 3 million BTC.

Bitcoin balance on exchanges
Bitcoin: Balance on exchanges: all exchanges (Source: Glassnode)

BTC balance change 2022

Unlike its 2018 predecessor, the 2022 bear market has proven to be an entirely different animal. As of 2022, an unprecedented amount of BTC has left exchanges numbering in the hundreds of thousands at a time at times.

Bitcoin – Net Exchange Position Change – All Exchanges (Source: Glassnode)

Prior to the aftermath of the FTX crash, a total of around 300,000 BTC began leaving exchanges as of early June 2022. After the crash, this bullish trend of BTC removal from exchanges only accelerated as the ‘not your keys, not your coins’ mantra took hold.

Bitcoin: Balance on exchanges: all exchanges (Source: Glassnode)

The 2018 bear market peak lasted around 136 days and saw a drop in BTC price of more than 80% from its all-time high (ATH). Compared to the BTC price now, around 76% below its all-time high (ATH) in the past few days, chart patterns suggest that the peak of the 2022 bear market may be here.

ATH price decrease: (Source: Glassnode)

The introduction of derivatives

A big difference between the 2018 bear market and the 2022 bear market is the introduction of derivatives into the cryptocurrency market.

With the introduction of futures and options in 2021, derivatives have since been a fundamental aspect of the crypto market, constituting a large part of the crypto ecosystem. Based on $2.5 trillion worth of derivatives, the global banking system evidences the sheer magnitude that derivatives have to play in the crypto ecosystem, and the impact they can and do have.

Futures Perpetual Funding Rate: (Source: Glassnode)

By analyzing previous bear markets, Cryptoslate found that the bottom is in when the shorts become so aggressive that the BTC price will not go any lower. This has been seen in previous bear market bottoms, the fallout from the Covid-19 pandemic, China’s summer 2021 crypto ban, with the Luna crash, and now with the FTX crash.

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