A total of $ 60 billion was canceled from the value of all cryptocurrencies in the last week, a decline that has many doubts if the current bear market for the asset class has finally come to an end.
Defined as a period of depressed activity and sentiment, the bear market saw the price of bitcoins, the largest cryptocurrency in the world, decreases more than 75 percent compared to the historical highs of January. Furthermore, as bitcoin represents over 50% of the entire market in terms of total capitalization, it is certain that the bear market could end when the bitcoin bulls refuse to cede more land.
But to find a real "bottom", many think that a "capitulation" must take place, since it is traditionally the last stage of a prolonged bear market.
By definition, capitulation is characterized by extreme sales of panic sustained by high volumes that increase the momentum until a possible "fund" is found. The fund is a price level in which the asset appears too cheap or undervalued for investors to allow them to decrease further.
It is difficult to consider that something is officially capitulated until it has occurred, but observing the previous capitulation phases and the market fund for BTC, there are some signs that traders and investors can observe for what it could allude to a official market fund
The fund of 2015
From 2013 to 2015, BTC experienced a similar bearish market, where it reached its all-time high of $ 1.163 in November 2013 and eventually fell by as low as $ 152 to January 2015 at $ 152.
From that day on, the price never retreated below $ 152, according to data from the Bitstamp exchange.
If that particular market fund is an example of true capitulation, it is clear that there are two fundamental factors to achieve capitulation: the volume climax and the rapid fall in prices.
As can be seen in the table above, the sell-off for BTC began to accelerate at the start of 2015, but did not reach a maximum level until two weeks later.
On January 15th, fear and panic in the market peaked. BTC's price fell 30 percent in a single 4-hour candelabra that was supported by its best-selling volume in several months: an extreme sales event like this creates a volume climax that tends to be the forerunner of a fund market.
The sign that probably cemented this point over time, while the fund was the one that followed the sales climax – even more purchasing volume. At this point, the fear in the market officially met the demand and those who were still interested in BTC considered the price of $ 152 too cheap to let it slide further.
As can be seen below, the market is again experiencing a significant sale, but so far has been more gradual than the capitulation experienced in 2015.
This is evident from the fact that no single 4-hour candelabra recorded a loss of more than 9%, while the single four-hour candelabra of the "low market" in 2015 recorded a loss of 30%.
That said, sales volume has clearly increased over the past two days and the current four-hour chart shows promising signs for a "at least temporary" minimum.
As can be seen in the table above, the sales volume is starting to decline and diverge from the falling price, a sign that sales orders are drying up. In addition, the last four-hour candle has just swallowed the previous candelabrum with a significant increase in the volume of purchases.
A candle is considered "swallowed upright" when its body completely covers that of the previous candle, these types of candles tend to form at the bottom of the descending phases, but they are more powerful the higher the time.
It should be noted that the Chapter events do not immediately reverse the long-term trend of a market. After BTC hit the fund in January 2015, it traveled largely sideways for another 10 months before starting a new uptrend towards the end of the year.
Such extreme sales events are also very rare, so it is unlikely that the exact conditions of the 2015 market will be replicated this time. It's safe to say though that when true capitulation occurs, you'll know it.
Revelation: The author holds BTC, AST, REQ, OMG, FUEL, 1 ° is AMP at the time of writing.
The bear market could be your image through Shutterstock; charts via TradingView