Following the Bitcoin Cash hard fork that took place on November 15th, the crypto market began a downward trend that is still taking place at the moment of writing this piece. Bitcoin, the world’s premier digital asset, has experienced a notorious decline in value: it was hovering around $6,500 about a week ago, but last Wednesday, the collapse began.
Today, the cryptocurrency is trading at $4.521.41, which represents a 4.97 percent decline in the last 24 hours. However, the day was not kind for BTC holders, as it reached a low of $4,272.11 at 16:00 UTC. What does the future hold? Will it keep sliding? Will it be worth less than $4,000 this week?
If we take the value of all cryptocurrencies and compare it with what it was like a week ago, it is worth $60 billion less. After reaching an all-time high of over $19,000 in January, BTC has declined more than 75 percent to this point. However, the bearish market will most likely reach its end once investors refuse to cede more ground and pounce at the opportunity to acquire BTC at very low price.
The Meaning of ‘Capitulation’
For that to happen, numerous people around the industry think that there needs to be a capitulation, which would represent the final phase in a bear market. Investopedia defines capitulation as the moment in which investors give up previous gains and sell their positions during a decline period. It is known in the securities field as “surrendering” or selling assets out of panic.
When the “bottom” is reached (which is impossible to know,) investors will pounce on the depreciated assets as they are too cheap to pass up, and they will not let it fall any further. In any case, we have some precedent about previous Bitcoin sell-offs, and there is light at the end of the tunnel: the current crash does not quite measure up to what happened in 2015.
Consider this: between 2013 and 2015, the market experience a similar behavior than what we are currently living: in the month of November 2013, the value of each BTC reached an all-time high of $1,163, but it bottomed out at $152 in January 2015, a span of 14 months. That represented an 86 percent decline, more than the 75 percent that BTC has shed since January 2018 until today.
Past Experiences
The most important takeaway is that, after that day in which BTC reached $152, it began to rise and did not collapse to those levels ever again. The data was provided by the Bitstamp crypto exchange.
In 2015, the BTC sell-off started at the beginning of January but did not really hit its stride until a couple of weeks later. To achieve capitulation, according to Coindesk, the most important factors are volume climaxes and rapid, steep declines.
In that dreaded January 15th, 2015, the price of Bitcoin collapsed a staggering 30 percent in a four-hour span, and it was fueled by the highest sell volume in months. It was the perfect example of an extreme selling event that originated a volume climax, the phase that comes before the so-called market bottom.
By Andres Chavez
