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December 6, 2021

Is This Only a Correction or the Beginning of the Bear Market?

Oliver Grah
Dec 6, 2021
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Introduction

Fed tapering, Evergrande default, Omicron… For weeks, we have been warning that significant macroeconomic headwinds were starting to blow, threatening to crash the stock and crypto party (at least temporarily).

With the amount of leverage and froth across all asset markets, the threat of a significant liquidation-induced sell-off was rising by the day – and that’s precisely what we got last Friday in both the stock and crypto markets.

Is the worst over for now, or should we expect more downside? That, of course, is the big question hanging in the air.

By the way: If you wish you could have gotten updates on the unfolding market meltdown this weekend, go ahead and follow Elliot, Daton or me to get news and real-time perspectives from the team.

This Is Fine Its Fine GIF - This Is Fine Its Fine Everything Is Fine GIFs

Market Watch

  • It’s clear that opening up Blockfolio to check one’s portfolio hasn’t been pleasant for crypto investors in the last few days – unless you were prepared for the crash and are now looking forward to new opportunities.

Twitter avatar for @blknoiz06
Ansem🃏💎 @blknoiz06
"max pain is up" - someone who has 0% of their portfolio in stables
6:31 AM ∙ Dec 6, 2021
307Likes5Retweets
Twitter avatar for @santiagoroel
Santa-iago R Santos | #9159 🦇🔊⚡️ @santiagoroel
Crypto market pendulum swings to extremes as emotion hijacks rational thinking. If you've been here for a while & still get overwhelmed by market swings then you haven't learned much. Go back & scrutinize your process (position sizing, concentration, illiquidity, time preference)
10:05 AM ∙ Dec 6, 2021
83Likes2Retweets
  • In the last days and weeks, crypto prices have been rising and falling in lock-step with the stock markets: Sharp declines, bounces, and further downside – almost everything happened in tandem.

  • We can in fact go back and compare the price action of Bitcoin and the S&P 500: They have been strongly correlated for months now… Hence, even though we don’t like it, crypto investors are HIGHLY dependant on what is going on in the macro world.

TradingView Chart
  • As you can see in the chart above, the S&P 500 (and Bitcoin) is sitting on top of important support levels on the daily time frame right now. So, the chance for a bounce this week is relatively high – the question is: What comes after?

  • With the lingering fear catalysts in macro land, especially surrounding the Fed’s next decisions, it’s certainly advisable to keep your risk management in check. If the Fed really sticks to its faster tapering pace, then yes, we could be in for a bloody end of the year.

Source: CNBC
Source: CNBC
Twitter avatar for @INArteCarloDoss
Girolamo Pandolfi da Casio ditto Carlo Dossi Erba @INArteCarloDoss
Moderate inflation in a sustained growth environment is good for stocks. Sticky high inflation in a slowing growth environment is terrible for stocks, especially if end of cycle with high multiples, as margins get crushed. Not sure who needs to hear this.
9:52 PM ∙ Dec 5, 2021
826Likes103Retweets
Twitter avatar for @LynAldenContact
Lyn Alden @LynAldenContact
@BitcoinTina I don't think they will be able to hike much, but am not ruling out the possibility of some 25bps hikes either before the market makes them stop. Recent market behavior combines initial reaction of Powell remarks plus omicron. Kind of noisy to form a sure view on imo.
2:59 PM ∙ Dec 6, 2021
56Likes4Retweets
  • At the same time, extreme fear like we see currently often marks the best buying opportunities in hindsight. Since we can’t perfectly predict price action going forward, a “DCA approach” seems appropriate, especially given the uncertain climate. That means: Buying slowly on dips and accelerating buys with increased panic in the market – precisely the opposite of the profit-taking we did on the way up…

Have We Entered a Bear Market?

  • Of course, the question on everybody’s minds is: Are we only experiencing another bull market correction, or is this the start of the decline into a brutal bear market? What helps to answer this question (apart from technical analysis, which at this point indicates that we still could be in a bullish macro structure), is a look at both macro and crypto-internal metrics:

  • When it comes to the macro picture, we have already outlined that uncertainty is high, and what we see in the stock markets at the moment could mark the beginning of a multi-month bearish trend – with a strong spillover effect into crypto.

  • However, when we look at on-chain metrics, we haven’t yet seen the typical signs that mark the beginning of a full-fledged bear market – specifically, whales and long-term holders starting to sell en masse, which would mean game over for the crypto bull cycle.

  • However, looking at on-chain metrics after last Saturday’s crash, we can see that long-term holders haven’t been fazed much, and almost exclusively short-term holders have panic-sold. This is generally behavior we would expect in a bull market correction and not a bear market.

Twitter avatar for @TXMCtrades
TXMC @TXMCtrades
Short-Term Holders are taking a ton of abuse. First, they realized their highest profits since March after the second ATH break in November... ...followed immediately by dumping their paper bags and realizing their worst losses since July. Almost no one else is spending here.
Image
2:29 AM ∙ Dec 6, 2021
258Likes29Retweets
Twitter avatar for @glassnode
glassnode @glassnode
Assessing the $BTC Sell-off🧵: #Bitcoin holders realised the third largest on-chain capitulation in history over the weekend, with over $2.18B in realised losses. This compares to: - $1.38B in March 2020 - $2.65B in May - $3.45B in June 1/4 Live Chart: glassno.de/3EzM8os
Image
6:44 AM ∙ Dec 6, 2021
493Likes111Retweets
Twitter avatar for @glassnode
glassnode @glassnode
Question is, which cohort of #Bitcoin holders were realising these losses? If we look to Long-Term Holder supply, we can actually see their total holdings are unchanged over the past week This makes it more probable it was recent buyers 2/4 Live Chart: glassno.de/3pBlhlE
Image
6:44 AM ∙ Dec 6, 2021
126Likes11Retweets
Twitter avatar for @glassnode
glassnode @glassnode
The Short-Term Holder SOPR metric on the other hand shows very significant losses were realised by this cohort. Spending by STHs was the least profitable it has been since the $29k lows set back in July. 3/4 Live Chart: glassno.de/31nLs7j
Image
6:44 AM ∙ Dec 6, 2021
114Likes7Retweets
Twitter avatar for @glassnode
glassnode @glassnode
However, #Bitcoin exchange inflows only hit 2k and 3.2k $BTC. Whilst meaningful, it is small in comparison to May >10k $BTC With almost 25% of futures contracts closed, we can determine that a leverage flush out is the most likely sell-side driver. 4/4
Image
Twitter avatar for @glassnode
glassnode @glassnode
#Bitcoin futures markets have experienced a significant deleveraging event, with over $5.4B in open interest closed yesterday. Total futures open interest declined from $22B to $16.6B in one day, a decline of 24.5%. Live Chart: https://t.co/SMzyKCPWdX https://t.co/CKXW275Y7r
6:44 AM ∙ Dec 6, 2021
152Likes14Retweets
Twitter avatar for @_Checkmatey_
_Checkmate.btc 🔑⚡🦬🌋checkonchain.com🌋 @_Checkmatey_
What Will is saying here is just look at supply dynamics, network utilisation and make an assessment on whether it is constructive or not Cycles/bull/bear are limiting If only there was a tool to assess the factual supply and demand patterns on the #Bitcoin ledger....if only...
Twitter avatar for @WClementeIII
Will Clemente @WClementeIII
Think we need to get rid of this binary concept of traditional Bitcoin Bull/Bear markets. Too many people trying to project the past onto the future, instead of imagining what the future looks like.
5:21 AM ∙ Dec 6, 2021
142Likes8Retweets
Twitter avatar for @WClementeIII
Will Clemente @WClementeIII
Have talked about this for a while but really think there’s a good chance 4yr cycles are over. Why? The type of market participants we now have. Could very well see rounded tops/bottoms from now on. Invalidation would be having a blowoff top, would then expect prolonged bear.
3:22 AM ∙ Dec 6, 2021
2,100Likes150Retweets
Twitter avatar for @intocryptoverse
Benjamin Cowen @intocryptoverse
As I have said since 2019, the only “four year cycle” for #Bitcoin was the last one. It makes absolutely no sense to assume that Bitcoin will repeat itself exactly every 4 years
5:46 AM ∙ Dec 6, 2021
2,509Likes143Retweets
  • To sum it up: At this point, not much indicates that we have entered a crypto bear market. The fact that certain subsectors within crypto are showing strength vs. Bitcoin could be a sign that the market is not ready for full-on bear mode yet.

  • However, the risk of a dark winter is certainly there, given the uncertainty in the macro environment. We have to keep our eyes peeled, especially on the Fed’s actions!

Twitter avatar for @santiagoroel
Santa-iago R Santos | #9159 🦇🔊⚡️ @santiagoroel
Bear markets sharpen the mind. If you don’t have a clear, well-developed thesis, a wild price swing will have the rug pulled out from under you. Fwiw - don't think we're in a bear but these micro market cycles have the same effect
obviously.substack.comHow to survive crypto winters and other bear marketsThe crowd is delusional. What to do about it.
12:39 PM ∙ Dec 6, 2021
167Likes32Retweets

Getting Your Hands Dirty With ZK-Rollups

  • While we know that ZK-Rollups will likely be the future of Ethereum (and the overall crypto space), there are not many ways to bet on this emerging trend yet. Yes, you can invest in DYDX or IMX, both ZK-Rollup-powered projects built on StarkEx.

  • But what we are really looking for is a chance to invest in the first fully-fledged EVM-compatible ZK-Rollups, on which the next generation of DeFi and NFT protocols will be built. Since these aren’t live yet / have a token, we must be attentive to spot potential airdrops or projects launching on StarkNet & ZkSync early (e.g., the “Uniswap on StarkNet”).

  • Odin-free.eth has done a great job summarizing everything currently going in the ZK-Rollup space and how you can “farm” potential airdrops (these are just a few Tweets of his thread, feel free to check the whole thread here):

Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
Ethereum 3.0 What can we test on the new #zkrollups $eth generation? @StarkWareLtd @starkwhale @zksync #starknet Time for a growing🧵
6:00 PM ∙ Dec 5, 2021
381Likes99Retweets
Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
@ZigZagExchange nice dex
6:02 PM ∙ Dec 5, 2021
Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
@zksync L2 wallet coins & nft Create a @gitcoin grant and checkout with
wallet.zksync.iozkSync WalletA crypto wallet & gateway to layer-2 zkSync Rollup. zkSync is a trustless, secure, user-centric protocol for scaling payments and smart contracts on Ethereum
6:03 PM ∙ Dec 5, 2021
Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
Mint, explore, and swap NFTs for a fraction of Ethereum mainnet costs. zkSync makes transactions fast, cheap, and secure.
zknft.xyzzkNFT
5:31 AM ∙ Dec 6, 2021
6Likes1Retweet
Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
Argent starknet wallet, waitlist invitation:
flash.argent.xyzJoin Argent’s L2 waitlist & $285K crypto sweepstakesArgent’s Layer 2 account is coming: low gas, high speed, and one tap DeFi. Join the waitlist for early access and a chance to win a prize in the $285K crypto sweepstakes. Sign up here:
6:22 PM ∙ Dec 5, 2021
24Likes1Retweet
Twitter avatar for @odin_free
odin-free.eth (🧙🏿‍♀️,🧙🏿‍♀️) @odin_free
try @ibetyouxyz play around: starknet.ibetyou.xyz read:
almanac.ioAlmanac
7:18 PM ∙ Dec 5, 2021
14Likes2Retweets

Will NFTs Have a Comeback Soon?

  • With crypto prices likely to consolidate in the weeks to come, the question arises: Will NFTs start to blossom again, just like they did this summer when ETH and Co. entered a “mini bear market”? The possibility is certainly there, and Google search volume suggests that the mainstream interest in NFTs is still growing…

    Twitter avatar for @0xSisyphus
    Sisyphus @0xSisyphus
    NFT search volumes continue to rise every single week... highly effective retail onboarding mechanism that hasn't yet peaked, one of the only charts still at ATH's
    Image
    Twitter avatar for @0xSisyphus
    Sisyphus @0xSisyphus
    Continue to revisit/follow NFT trading volumes and NFT search data Search volumes continue to rip higher. NFT volumes started coming back last wk or so... theory is that people onboarding, just doing so slowly b/c UX/UI isnt great https://t.co/kAGZySbnq9 https://t.co/AilzKeSqSz
    1:55 PM ∙ Dec 6, 2021
    51Likes7Retweets
  • Does that mean that all the PFPs we have seen shooting up like mushrooms this summer will come roaring back? Absolutely not since there is clearly a massive oversupply of low-quality NFT collections and "cash grabs" out there that, in all likelihood, will trend towards 0. But NFT projects with strong utility and communities might get a chance to shine again.

Twitter avatar for @0xSisyphus
Sisyphus @0xSisyphus
now that we starting to get into bear market territory on crypto prices wonder if NFT onboarding remains as robust as it has been, data in prob next 1-2 weeks p telling
1:56 PM ∙ Dec 6, 2021
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December 6, 2021
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2 Comments
Legalmastermind
Dec 6, 2021Liked by Oliver Grah

Thanks Oliver appreciate the post, have a great day!

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Shaun
Dec 7, 2021

Thanks guys.. another great read!

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