Deep Dive in the Cryptocurrency Waters: Analysts Caution as Bitcoin Dips Further into the Bear Market


The cryptocurrency king, Bitcoin, has faced a tumultuous journey laden with ups and downs. In its latest twist, Bitcoin’s value nosedived by 45.7% since reaching an all-time high of $64,895.22 on April 14, 2021, to a declination point of just $35,210 this past Saturday, reflecting a dip of $2,131.11 from the prior day’s value.

Since the year 2018, Bitcoin has experienced an astonishing 900% upsurge, dwarfing the growth seen in several historical boom cycles over the past five decades, including the gold boom in the late 1970s, Japan’s Nikkei 225 in the 1980s, and the Nasdaq 100 in the 1990s. Its swift rise overshadows even the early 2000s Chinese stock market bubble.

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Experts at JPMorgan Chase & Co have raised red flags over the backwardation observed in Bitcoin’s futures market, where current prices outpace future projections, suggesting caution is warranted.

“The return to backwardation these past weeks is a troubling sign that reflects possible bear market conditions,” according to a report from JPMorgan strategists, including Nikolaos Panigirtzoglou. Another point of concern they highlighted is the diminished dominance of Bitcoin’s market value compared to the total market cap of cryptocurrencies.

Enthusiasts and investors are on the edge of their seats as Bitcoin wobbles within the $30,000 to $40,000 trading range, a significant fall from its near $65,000 peak last April. Factors impeding its progress include recent high-profile cyberattacks demanding ransom payouts in Bitcoin, its environmental impact, and rigorous regulatory stances in countries like China.

“Bitcoin must conquer the $39,460 barrier, which is the upper limit of its recent value range, to truly gain momentum. However, a decisive break from this range is essential for a bullish outlook to dispel current uncertainties,” Pepperstone Financial Pty’s head of research, Chris Weston, remarked in a recent assessment.

Boosts in Bitcoin’s appeal have come from various quarters, including El Salvador’s adoption as legal tender and discussions by Brazil’s Nubank to integrate Bitcoin following its investment from Berkshire Hathaways and the acquisition of Easynvest, which manages Brazil’s first Bitcoin ETF.

Presently, Bitcoin’s portion of the total crypto market cap sits at 42%, a decrease from about 70% at the year’s commencement, as per data from CoinGecko. JPMorgan’s strategists posit that Bitcoin will have to reclaim a market dominance of 50% to herald the end of this bearish phase.

The fervor around cryptocurrency remains polarized, with an equal split between those who champion it as an asset class and skeptics who deem it a transient bubble lacking solid fundamentals and poised to burst.

“It’s powered by a mix of investor fear and greed, soaring to lofty heights,” opined Bryce Doty, a portfolio manager at Sit Fixed Income Advisors. “That definitely has the earmarks of a market froth situation.”

Seeing that Bitcoin is devoid of intrinsic fundamentals, it functions merely as a medium for monetary exchanges and carries transactional charges. This leaves its investors relying solely on the anticipation of future demand, which muddies its value—raising the risk of volatility.

Conventional markets refer to the volatility index, projecting price fluctuations based on a 30-day forecast tied to the S&P Index. Recently, Bitcoin has been subject to its own volatility index, offering insights into the price variability of the leading digital currency over various time spans.

The valuation of Bitcoin also fluctuates with public perception of its asset-preserving qualities and is highly sensitive to news developments. Plus, there’s the impact of Bitcoin liquidation events. To reach a level of stability, Bitcoin requires a broader market adoption that could eventually endow it with intrinsic value for substantial currency holders.

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