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This On-Chain Indicator Suggests Bitcoin Still Only 1/3rd Into Bear Market

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This On-Chain Indicator Suggests Bitcoin Still Only 1/3rd Into Bear Market

The Bitcoin long-term holder SOPR may suggest that the crypto has still only gone one-third of the way through the latest bear market.

Bitcoin 20-day SMA Long-Term Holder SOPR Has Only Been 86 Days Into Bottoming Zone

As pointed out by an analyst in a CryptoQuant post, the crypto is still only 1/3rd of the way into the 260 days average historical bottoming period.

The relevant indicator here is the “Spent Output Profit Ratio” (or SOPR in brief), which tells us about whether the average Bitcoin investor is selling at a profit or at a loss right now.

The metric works by looking at the history of each coin being sold on the chain to see what price it was last moved at. If this previous selling price was less than the latest BTC value, then the coin has just been sold at a profit. While if the last value was more than the current one, then that particular coin realized some loss.

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When the value of the SOPR is greater than one, it means the market as a whole is selling at a profit right now.

On the other hand, the indicator being less than one implies the average holder is moving coins at a loss at the moment.

The “long-term holders” (LTHs) is the Bitcoin cohort that includes all investors who have held onto their coins for at least 155 days without selling or moving them.

Now, here is a chart that shows the trend in the BTC SOPR (20-day MA) specifically for these LTHs over the the last several years:

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Looks like the value of the metric has been pretty low recently | Source: CryptoQuant

As you can see in the above graph, the Bitcoin LTH SOPR (20-day SMA) dipped below the “one” mark a while back.

Also, in the chart the quant has marked all the relevant zones of trend for the indicator in relation to the bear market.

It seems like historical bottoming periods have lasted whenever the metric has been stuck below the breakeven point.

On average, past bear markets have lasted around 260 days based on the LTH SOPR. In the current cycle, the coin has so far been 86 days into the bottoming zone.

This would suggest that if Bitcoin ends this bear market in about the same time as the average, then the crypto is still only one-third of the way through.

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BTC Price

At the time of writing, Bitcoin’s price floats around $23k, down 2% in the last week. Over the past month, the coin has gained 13% in value.

The value of the crypto seems to have been moving sideways during the last few days | Source: BTCUSD on TradingView
Featured image from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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Coinbase reports $1.10B loss in Q2 as assets on exchange slump

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Coinbase reports $1.10B loss in Q2 as assets on exchange slump

Coinbase reports $1.10B loss in Q2 as assets on exchange slump Liam ‘Akiba’ Wright · 2 hours ago · 3 min read

Coinbase reported the biggest loss ever in Q2, losing more than $1B over the past 3 months. Assets held on the exchange also fell to just $96 million.

3 min read

Updated: August 9, 2022 at 11:14 pm

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Cover art/illustration via CryptoSlate

Coinbase Global’s second-quarter results show that the crypto exchange recorded a net loss of $1.10 billion during the period. This compares to a loss of $430 million in the first quarter and a net income of $1.61 billion in the second quarter of 2021.

Net revenue for Q2 came in at $803 million, down from $1.17 billion in Q1 and $2.03 billion in Q2 2021, according to the Aug.  9 shareholder letter.

The value of crypto assets on the exchange fell to just $96 billion in Q2 from $256 billion in Q1. A year ago, in Q2 2021, the assets on the exchange totaled $180 billion.

Source: SEC filing

Coinbase also pointed to four major crypto asset price cycles the space has seen since 2010, noting in the below graph that from the most recent peak in November 2021 to the lows in June 2022, Bitcoin market capitalization has declined 74%.

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Source: SEC Filing

The company said:

Each prior cycle has lasted anywhere from two to four years and resulted in the crypto market capitalization significantly increasing compared to the preceding cycle. Each prior cycle brought in new market participants, developers, and products that further advanced the cryptoeconomy. These cycles are evident by viewing Bitcoin prices over time on a logarithmic scale. Prior peak-to-trough declines have been 84%, 85%, and 94% historically, although these prior declines did not coincide with a broader macro downturn.

In the shareholder letter, the company compared recent data to 2020, as it believes “the best way to evaluate Coinbase through these early years of this nascent industry, is through the same lens we evaluate crypto — over a price cycle.”

From 2020 to 2022, verified users have tripled, monthly volume is up 6x, and assets on the platform have increased 4x.

Coinbase stated that “down markets are not as bad as they may seem.” It continued, “it can feel scary and near-term financials can be heavily impacted,” but it will “emerge stronger than ever before.”

While the figures may appear bearish for the US-based exchange, many in the crypto industry would agree with Coinbase’s sentiment that “crypto markets are cyclical.” While several exchanges such as Celsius and Voyager have filed for Bankruptcy this quarter, Coinbase remains bullish on its future outlook.

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The company’s monthly transacting users (MTU) only dropped 2% versus Q1.

“Despite continued market softness, we were pleased to serve 9.0 million MTUs in Q2, a decrease of 0.2 million or 2% compared to Q1.”

Coinbase noted that Bitcoin trading volume and transactional revenue both rose 7% and 6%, respectively, in Q2 vs Q1. The total volume of retail transactions fell to $46 billion from $74 billion in Q1. Institutional trading volume also fell to $171 billion in Q2 from $235 in Q1.

Further, regarding institutional engagement, Coinbase notes,

“On the institutional side, with all of the market volatility it can be easy to lose sight that both new and existing clients continued to use our platform as they embrace crypto as a new asset class.”

Coinbase states that three themes underpin its decline in trading volume;

  1. Core U.S. retail customers were less active but have not left the platform
  2. A “large amount of trading volume” took place on off-shore exchanges that can list crypto derivatives with which Coinbase does not have “product parity with.”
  3. Coinbase did not have “exposure to the significant trading volumes related to the liquidation events of $LUNA.”

While Coinbase claimed it did not have significant exposure to $LUNA and that it was an “unsupported asset,” it did list the wrapped version of the token, wLUNA; something omitted from the Shareholder letter.

The exchange also noted that it did not have any counterparty exposure to Three Arrows Capital, Celsius, and Voyager.

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Adjusting to market conditions

Coinbase also said it taking steps to cut costs in the face of “challenging crypto market conditions.”

These steps include limiting its hiring for backfills and certain positions and cutting back on paid media and incentives. The company already reduced its workforce by 18% in June.

The company is also optimizing infrastructure and professional services expenses as well as investing in teams in lower-cost regions.

The company added:

“On the expense side, we are rigorously managing our expense levels and will continue to do so. On the product side, we are executing a ‘pause, maintain, and prioritize’ approach to ensure we are focused on the highest priority opportunities”

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Bankruptcy

Celsius CEO under fire as Committee of Creditors, DFPI implicate him

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Celsius CEO under fire as Committee of Creditors, DFPI implicate him

Celsius CEO under fire as Committee of Creditors, DFPI implicate him Christian Nwobodo · 9 hours ago · 2 min read

Celsius CEO Alex Mashinsky is accused of promoting false information about the safety of users’ funds at the brink of the bankruptcy.

2 min read

Updated: August 9, 2022 at 3:28 pm

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Cover art/illustration via CryptoSlate

The Committee representing customers affected by Celsius’ bankruptcy has issued a mission statement as it seeks further investigation into CEO Alex Mashinsky for allegedly misleading the public.

Unsecured creditors of Celsius on July 27, formed a group that is represented by five individuals and two entities including Covario AG, a Zug-based crypto prime brokerage, to fight for the speedy recovery of their funds. 

The Committee in its statement accused Celsius CEO Alex Mashinsky of allegedly promoting misleading information before the bankruptcy declaration.  Mashinsky, through his public videos and messages, was reportedly promising customers that their funds were safe.

All funds are safe. We continue to be open for business as usual

As part of our responsibility to serve our community, @CelsiusNetwork implemented and abides by robust risk management frameworks to ensure the safety and security of assets on our platform.

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— Alex Mashinsky (@Mashinsky) May 11, 2022

However, his claims proved false on June 12, when Celsius paused all withdrawals citing “extreme market conditions”. It went on to file a Chapter 11 bankruptcy one month later.

The committee has appointed international law firm White & Case as its counsel and engaged restructuring advisors M3 Partners, Perella Weinberg Partners, and Blockchain analytics unit Elementis to help in the ongoing investigation.

According to the statement:

“The Committee is prepared to work day and night to protect the rights of its constituents who have been harmed by Celsius’ improvident decisions and is up to the task before it,”

DFPI comes after Celsius’ “Earn Program”

The Department of Financial Protection and Innovation (DFPI) on August 8, issued a “cease and desist” order to Celsius for allegedly offering crypto interest accounts to customers without due registration.

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Celsius and its CEO Alex Mashinsky are accused of providing misleading information about the risks associated with making deposits in the interest-bearing “Earn Program”.  The DFPI also accused Celsius of failing to explain that in the case of sudden requests for withdrawals that it may not meet all customer’s demands when due.

According to the DFPI, the Earn Rewards accounts offered and sold by Celsius are securities in the form of investment contracts and should be registered with securities laws.

The DFPI has opened a public complaint form to receive feedback from customers impacted by Celsius’ withdrawal freeze, as it seeks to accelerate the investigation.

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Bear Market

Sphere 3D Bitcoin production remains flat in July amid US customs problems, crypto winter

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Sphere 3D Bitcoin production remains flat in July amid US customs problems, crypto winter

Sphere 3D Bitcoin production remains flat in July amid US customs problems, crypto winter Zeynep Geylan · 1 hour ago · 2 min read

Carbon free mining company Sphere 3D’s Bitcoin production remained flat in July as their new installations were delayed by U.S. customs, and the current winter market still goes hard on crypto miners.

2 min read

Updated: August 8, 2022 at 8:55 pm

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Cover art/illustration via CryptoSlate

Carbon-free mining company Sphere 3D‘s July 2022 report showed that it managed to keep up with its usual performance in July even though the 4,000 new mining rigs were held back in the U.S. customs during the winter market, where mining companies have been taking significant hits.

The company has been expecting 4,000 S19J Pro mining machines to be delivered and set to work at the beginning of August. However, they never reached their destinations.

According to the report, U.S. customs temporarily confiscated the equipment in mid-June, saying they were waiting for a receipt of documentation from the supplier. Moreover, the report raised a red flag about U.S. customs and said:

“Based on conversations with industry leaders, other mining companies are being challenged with similarly frustrating U.S. Customs clearance issues.”

Regardless, Sphere 3D managed to increase its Bitcoin holdings up to 62.3. The company has been holding on to its 0.41 daily Bitcoin production volume since June and managed to produce 12.78 Bitcoin during July as well.

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Mining companies in the winter market

Cryptosphere is experiencing its coldest winter. As soon as the winter started, a sell-out trend also emerged amongst crypto miners. At the time, Bitcoin was traded for around $30,000, and the trend suggested that miners were expecting it to fall more.

They were proven right. A month later, Bitcoin fell as low as $22,600, which made all mining rigs produced before 2019 to lose profitability. The amount these machines mined didn’t compensate for the electricity they consumed.

Soon after, major mining companies showed signs of financial trouble because they could not pay their bills. Most were forced to continue the sell-out trend to cover operating costs, while some lost whole facilities because they couldn’t pay their electricity bills.

Difference of renewable energy

While the mining sphere is taking significant hits due to Bitcoin’s energy prices and winter rates, Sphere 3D seems intact, primarily thanks to its renewable energy sources. The company defines itself as a “net carbon-neutral cryptocurrency miner.” Based on their monthly report, they’re operating Antminer S19 Pro’s, which would be profitable by consuming electricity as low as $16,411 BTCUSD.

Crypto mining causes less ecological damage compared to the gold and banking sectors. However, renewable mining also offers security in severe winter conditions. To prevent the mining sector from losing profitability, tech giants have been working on new technologies to create energy-efficient mining rigs.

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The latest update came from Samsung when the company announced it’s about to launch 45% more energy-efficient 3-nanometer mining chips. The new chips are expected to have 23% higher performance. Moreover, the company also announced that a new 2-nanometer mining chip will be released by 2025, with even higher energy efficiency and performance.

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