As reported by the world’s largest digital asset manager, Grayscale Investments, a cryptocurrency market cycle has an average lifespan of 4 years (1275 days), and a bear market begins when the realized price moves below the market price (the current trading price of the asset).
The firm noted that bitcoin’s realized price, the sum of all purchase values divided by the number of BTC currently in circulation, could be effectively used to calculate the cycle timeline. Grayscale’s actual price calculation is the sum of all assets at their purchase price divided by the asset’s market capitalization, allowing it to measure the number of profit or loss positions.
Accordingly, the investment firm said that the actual price of Bitcoin (BTC) was below the market price on June 13, which signals the beginning of a bear market. The value of Bitcoin may have been volatile in the current market situation, but the network continues to function as expected.
Grayscale says the network is on track to process $18 trillion transactions this year, up from $13 trillion in 2021. The use of this asset, along with other crypto assets for remittances, has continued to grow despite poor market conditions.
According to Grayscale, Mexico-based crypto exchange Bitso saw a quadruple in cross-border remittances between Q1 2021 and Q1 2022. The firm says the decentralized finance (DeFi) space has had an interesting year seeing lenders forced to repay their loans before equity holders or centralized lenders to avoid a liquidity crisis.
“Despite capital outflows due to users deleveraging their positions, the total borrows on lending platforms, like Aave and MakerDAO, remain higher than at the start of 2022.”
In addition, the liquidity of stablecoins paid on decentralized exchanges like Uniswap (UNI) is five times higher than that of the largest centralized cryptocurrency exchange by trading volume, Binance.
The Best Time to Buy
Grayscale deduced that the current market cycle, which began in 2020, could last for less than 250 days (about eight months) if previous market cycles repeat themselves before returning. However, the firm hinted that this point presents investors with the best buying opportunity.
The report also uncovered that bitcoin’s movement in the all-time high (ATH) range last year was longer than in previous cycles. The firm attributed this to the market’s accelerated growth over the past few years, adding that it has become easier for retail and institutional investors to invest in crypto assets, unlike in previous market cycles.
“The 2020 cycle appears to have had a longer run in the ATH range with two prolonged peaks in contrast to the sharp rise and fall in prior cycles. This may have been due to the growing maturity of the crypto market that did not exist in previous cycles.”
The Tenacity of the Crypto World
In the conclusive part of the report, Grayscale stated that regardless of the severity of each market cycle, the crypto industry always comes out stronger in the end.
The firm added that each failure recorded in the space has helped shape the crypto industry and that the current cycle has provided users with “battled-tested” DeFi protocols.
“Despite price declines, liquidations, and volatility, the crypto industry continues to build and innovate, pushing the boundaries of what is possible,” the firm said.
