Bear market

Institutional appetite continues to grow amid bear market — BitMEX CEO

Institutional appetite for Ethereum will grow now that the network is ESG compliant, according to the BitMEX boss.

In a recent interview, BitMEX CEO Alexander Höptner shared his thoughts about institutional investors who, in his view, still have an appetite for crypto and Ethereum.

Speaking at the Token2049 conference in Singapore on Sept. 28, the crypto executive told Cointelegraph that there has not been a “single slowdown of institutional push into crypto” during this bear market.

He added that institutions and finance industry players typically use bear markets for innovation. There is a lot more pressure to deliver in a bull market, but bear markets offer the luxury of more time.

Höptner also commented that adoption for the finance industry has a long horizon which is why institutions will be buying and holding crypto assets while the opposite can currently be said for the retail sector.

When asked whether institutions or retail will end the bear market he said that retail is still pulling out whereas institutions are still making a push, before adding:

“I think that the institutions are making themselves ready now to provide the services and retail will come back and push it up again.”

The BitMEX boss is also convinced that institutions will start piling back into Ethereum now that it has switched to proof-of-stake and satisfies the Environmental, Social and Governance (ESG) concerns.

“Ethereum is the ideal protocol to build stuff on,” he commented before adding “this is the ideal public event to build financial products for ESG conformity,” in reference to the recently deployed Merge.

At the moment, ESG conformity is paramount, he said, adding that institutions “can offer products that are really for a wide audience once again while checking one of the boxes that they have for their compliance.”

Related: Three-quarters of institutions to use crypto in the three years: Ripple

The $3,000 figure was mentioned regarding Ether (ETH) prices by year-end, and Höptner sees this as a possibility, especially now that the network is more environmentally friendly and big banks are using it. At the moment, ETH is trading up 3.8% over the past 24 hours at $1,336, so it has a long way to go in the next three months.

Last week, Cointelegraph reported that liquid staking products such as Lido’s Staked Ether (stETH) are more profitable and capital efficient than holding regular ETH. As such, they will increase in popularity while hodling ETH could become obsolete.

Bitcoin network activity decline suggests longer bear market: Glassnode

Although Bitcoin prices made a strong 15% recovery over the past week, metrics suggest more network demand would be needed to sustain further price increases.

With several on-chain metrics for Bitcoin (BTC) still in a bearish range, a continuation of the recent price recovery will require increased demand and fees spent over the network, says Glassnode. 

The assessment of mediocre market growth over the past week came from blockchain analysis firm Glassnode in its latest “The Week On Chain” report on Monday.

In it, analysts pointed to sideways growth in transactional demand, active Bitcoin addresses remaining in “a well defined downward channel” and lower network fees as reasons to temper investors’ excitement about the 15% spike in BTC price over the past week. However, BTC is currently down 2% over the past 24 hours, trading below $23,000 to $22,899, according to CoinGecko.

The report begins by highlighting the characteristics of a bear market, which includes a decline in on-chain activity and a rotation from speculative investors to long-term holders. It suggests that the Bitcoin network is still demonstrating each of those traits.

Glassnode wrote that a decline in network activity can be interpreted as a lack of new demand for the network from speculative traders over long-term holders (LTHs) and investors who have a high level of conviction in the network’s technology. The report states:

“With exception of a few activity spikes higher during major capitulation events, the current network activity suggests that there remains little influx of new demand as yet.”

In contrast to last week, when a significant level of demand appeared to be established at the $20,000 level for BTC and creating a floor, the additional demand needed to sustain any further price increases is not observable. Glassnode refers to the steady decline in active addresses as a “low bear market demand profile,” which has been in effect essentially since last December.

The analysis observed similarities between the current network demand pattern and the one established in the 2018-2019 period. Similar to the previous cycle, network demand dried up after the April 2021 all-time high in BTC price. There was a notable recovery in demand leading up to the following November as prices recovered to a new ATH.

However, since last November, demand has been on a downward trend, with a major spike down during the mass sell-offs in May:

“The Bitcoin network remains HODLer dominated, and as yet, there has not been any noteworthy return of new demand.”

Glassnode added that the poor demand from anyone other than dedicated Bitcoin enthusiasts is forcing network fees into “bear market territory.” Over the past week, daily fees amounted to just 13.4 BTC. By contrast, when prices reached ATH last April, daily network fees topped 200 BTC.

Related: Bitcoin bulls defend $23K amid warning bear market rally ‘alive and well’

Assuming fee rates increase to any noteworthy degree, Glassnode suggests that it could mean demand is on the rise, helping to sustain further “constructive structural shift” in Bitcoin network activity:

“Whilst we have not seen a notable uptick in fees yet, keeping an eye on this metric is likely to be a signal of recovery.”

Don’t wait around for recovery, keep on building, says Web3 exec

Tegan Kline said that the bear market is a “builder’s paradise” because there is less noise and teams can focus on laying foundations.

There are still many more things that can be built within the blockchain space, and the good news is that members of the community know what they are, said Tegan Kline, co-founder of Edge & Node — the initial team behind The Graph. 

In an interview with Cointelegraph, Kline discussed the crypto winter and gave suggestions on what community members should focus on while the markets are down. According to the Web3 executive, the community should stick to its core values and stay determined to deliver real solutions. Kline explained:

“We all go through the downturn together, and we all come out of it stronger. We all support each other’s projects, and there’s a virtuous cycle there that continues to nurture the ecosystem.”

Kline also highlighted that the crypto winter provides an opportunity for builders, as there is less noise during a bear market, making it what Kline described as a “builder’s paradise.” She also said:

“The community will hunker down and focus on building. Only the committed founders and community members stick around, and this ends up being a great filter. Some even welcome the bear market for this reason.”

Kline underscored that there are still many things that need to be built in the space, mentioning layer 2s, multichain aggregation, bridge technology, custody and decentralized autonomous organizations as some of the stuff on the way.

Kline also mentioned that blockchain can affect social media. “As the social networks of Web3 come to fruition, they will be a game changer,” she said. In addition, the executive believes that decentralized exchanges will eventually surpass the volume of centralized exchanges.

Related: Crypto winter survival guide: Community shares game plan for the bear market

When asked what blockchain community members should keep in mind during the crypto winter, Kline said that some of the greatest companies and technologies were born out of recessions. The executive urged the community to keep building, highlighting:

“Don’t wait around for the recovery to happen. Keep building, focus on the core mission, and remember that we are laying the foundation for the next recovery now.”

Finally, Kline mentioned that the blockchain ecosystem could expect a wave of more resilient decentralized technologies to rise out of the crypto winter. She also said it may be wise to focus on self-custody, decentralization and understanding counterparty risk.

Crypto winter has 250 days left if the market cycle repeats: Grayscale

The crypto industry has endured some infamous bear markets, and the 2022 downturn will be remembered for its acid test of decentralized finance platforms and over-leveraged trading.

Grayscale Investment’s latest Insight report provides interesting food for thought, pinning the start of the current bear market in June 2022, which could last another 250 days if previous market cycles are to repeat themselves.

Grayscale notes that cryptocurrency markets mimic their conventional counterparts with cyclical movements. Bitcoin (BTC) market cycles conventionally last four years or approximately 1,275 days. The firm defines a cycle when the realized price of BTC moves below the current market price.

Realized price is determined by the sum of all assets at their purchase price divided by the asset’s market capitalization. This gives a measure of how many positions are profitable, if at all. Wednesday saw the realized price of BTC cross below market price, which Grayscale identifies as the start of the current bear market.

The firm believes this presents a prime investment opportunity — which is set to last another 250 days from July if the duration of previous cycles repeats itself.

Retracing history, Grayscale highlights the 2012–2015 market cycle with events like the rise and fall of the dark web marketplace Silk Road and the infamous Mt. Gox debacle, which led to the first major bear market. The development of Ethereum, major exchanges and wallet providers led to a gradual climb to the next highs in the market.

2016 to 2019 will be remembered for the boom in initial coin offerings, made possible by smart contract functionality introduced by Ethereum. Much of the capital that flowed into the cryptocurrency ecosystem in late 2017 exited the following year, as the second major bear market began.

The 2020 market cycle will be remembered as a story of leverage. Grayscale notes that investors were enticed to leverage trade with increased government spending during the COVID-19 pandemic. 

Related: Terra contagion leads to 80%+ decline in DeFi protocols associated with UST

A positive funding rate lasted for six months, with many traders leveraging positions with cryptocurrency as collateral. When crypto prices dipped, traders were forced to sell, which triggered a cascade of liquidations, seeing BTC drop from a November 2021 peak of $64,800 to $29,000 in June 2021.

Again leverage hurt the markets a year later, but decentralized finance’s (DeFi) major centralized finance (CeFi) players faltered after attracting massive investment with attractive yields. The rest is history, as the collapse of the US Terra stablecoin (UST) engulfed the ecosystem. Over-leveraged traders and positions were liquidated across various CeFi platforms — which exacerbated market sell-offs and sunk major capital lending firms in the space like Celsius and Three Arrows Capital.

Bitcoin hodling activity resembles previous market bottoms: Glassnode

Bitcoin’s price had just topped $21,000 at the time of writing — meaning around 45% of BTC holders have an “on-paper loss,” according to Glassnode.

The majority of Bitcoin (BTC) has been hodled for at least three months in behavior bearing a striking resemblance to previous Bitcoin market bottoms, says blockchain analytics firm Glassnode.

In a Saturday tweet, Glassnode noted that more than 80% of the total U.S. dollar-denominated wealth invested in Bitcoin has not been touched for at least three months.

This signifies that the “majority of BTC coin supply is dormant” and that hodlers are “increasingly unwilling to spend at lower prices,” said the firm.

Bitcoin’s price is $21,013 at the time of writing, down almost 70% from its all-time high of $69,044 in November 2021. The current price puts around 45% of Bitcoin holders with an on-paper loss, according to crypto intelligence firm IntoTheBlock.

According to the Glassnode chart, other times that saw similar levels of Bitcoin hodling were during the end of the bear markets of 2012, 2015 and 2018.

Last week, Coinbase’s head of institutional research, David Duong, wrote in a July 12 report titled “The Elusive Bottom” that on-chain data suggests that recent BTC selling has been carried out “almost exclusively” by short-term speculators. Long-term BTC holders “have not been selling into the market weakness,” he added.

“These holders own a highly concentrated ~77% of the total supply, which is down slightly from 80% to start the year but still quite high,” he explained before adding:

“We see this is a positive sentiment indicator as we believe these holders are less likely to sell BTC during turbulent periods.”

Earlier this month, Glassnode analysts noted that the Bitcoin market had seen an almost complete purge of “tourists,” noting that activity on the network is at levels concurrent with the deepest part of the bear market in 2018 and 2019.

Related: Bitcoin ready to attack key trendline, says data as BTC price holds $20K

Glassnode revealed that the number of active addresses and entities had seen a downtrend since November 2021, implying new and existing investors alike are not interacting with the network.

Additionally, the number of non-zero BTC addresses has reached an all-time high of 42,530,652, according to the firm.

Binance CEO plans to leverage crypto winter

The boss of the world’s largest crypto exchange said we’ve been through this before as a community.

Binance CEO, Changpeng Zhao, commonly known as “CZ,” said in a recent interview that a potential crypto winter is good for business.

When asked how Binance will fare during the current crypto winter following reports of recruitment freezes at Gemini and Coinbase, he answered confidently.

“It’s not the first time we’ve gone through a crypto winter. If we are in a crypto winter, it would be my third and Binance’s second. So it’s not the first time we’ve been through this.”

Changpeng Zhao has undertaken what is, for many exchanges, a hairy endeavor — recruiting new staff during a bear market to take advantage of the next possible bull market. “Right now is much better to hire, during bull markets, everyone is starting their own projects, and everyone is getting paid a ridiculous amount of compensation,” he continued:

“Now the markets are more balanced, so top talents are available, and we want to hire them.”

The crypto-world has suffered through a period of decline these past few weeks, but the Binance boss still recommended that now is an excellent time for companies to expand and hire.

Related: Major crypto firms reportedly cut up to 10% of staff amid bear market

Meanwhile, however, many crypto exchanges such as Coinbase and Gemini have frozen new hires and laid-off employees. Companies such as Crypto.com and BlockFi have also laid off over 5% of their employees due to market conditions. Trading platform Robinhood also axed 9% of its staff in April.

Changpeng continued by stating, “Binance has always been very frugal on large spending, we didn’t sponsor the Super Bowl,” and ”we didn’t buy stadium rights.”

Binance temporarily paused BTC withdrawals due to a stuck transaction causing a backlog on Monday, but CZ confirmed that funds were “SAFU” and they were resumed a few hours later.