A new report by Adamant Capital concludes that the bear market for Bitcoin might be nearing an end, with the currency entering an accumulation phase before the next big bull run.
Compared to the crypto winter of 2018, during which investors were forced to shed BTC or suffer losses as the currency fell from $20,000 to a relative low of $3000, the current market has traders much more optimistic about on the price outlook. Investors are now accumulating Bitcoin, putting pressure on bears who may be selling just ahead of another big price rally.
Tuur Demeester and Michiel Lescrauwaet, co-authors of the report, said that the current price point for Bitcoin should be appealing to investors,
“Now, at 75% below its 2017 all-time high, we believe the current bear market represents an exceptional opportunity for value investors.”
In what Adamant Capital refers to as the ‘accumulation phase’ for Bitcoin, the analytics firm expects BTC to trade in a range of $3000 and $6500, as bears unload their coins to willing bulls who are looking to lock in a discounted price for the number one cryptocurrency by market capitalization.
The report also concluded that retail investors took a bath in November 2018, capitulating any previously made gains–or submitting to significant losses–in a capitulation event that saw the price of Bitcoin fall 48 percent. While some of the cryptocurrency price fall can be attributed to the market uncertainty of Bitcoin Cash’s hash war, investors were also fatigued from nearly 12 months of bear market prices. The end result is a glut of investors looking to re-enter the market at a favorable condition, especially if they sold out at Bitcoin’s relative price low during last November.
Adamant Capital has made a point of tracking unrealized Profit and Loss and indicator of market performance, and reports that the most recent price rally has had a substantial impact on that metric,
“The recent price rally from $4,000 to over $5,000 markedly improved HODLer’s Unrealized P&L improving our reported sentiment value from capitulation to hope,”
The report, in particular, looks at the claim that retail investors (individual investors as opposed to professional traders or institutions) have largely left the market following the last year of losses. Such a situation would indicate that the well of bearish sellers for Bitcoin may be smaller than previously thought. Adamant Capital points to Google Trends data that indicates “apathy and disinterest” on behalf of retail investors, with searches for Bitcoin dropping to as low as March 2017 values.
Adamant also points to gradual decline in Bitcoin price volatility over the last several months, a factor that has historically been attributed to the actions of retail investors,
“High Bitcoin volatility can be a proxy for the involvement of trigger-happy retail speculators, whereas low volatility tends to coincide with phases of consolidation, apathy, and accumulation.”
With finicky retail investors gone, long-term holders have come to make up the majority of the market, a group that will be looking to accumulate more BTC at current prices and avoid succumbing to the bearish sellers.
The combination of price anticipation and investor makeup has led Adamant to conclude that Bitcoin, at its current price point, is back in “undervalued territory.”