Bitcoin seems like a different planet this year, based on many popular on-chain metrics. The bear markets in the Bitcoin space come in different sizes and shapes, but this time around there are lots of reasons to panic.
BTC has been described as facing “a bear of historic proportions” in 2022, but just a year ago, a similar feeling of doom swept the crypto markets as Bitcoin saw a 50% drawdown in weeks. But beyond price, 2022 on-chain data seems to be wildly different. Here are three key metrics showing how the Bitcoin bear market is not like the last one.
Hash Rate
Everyone still remembers the Bitcoin miner exodus from China, which effectively banned the practice in one of its majorly prolific areas. While the impact of that ban has since come under great suspicion, the move at the time saw many of the network participants relocate mainly to the United States within a few weeks.
As a result, Bitcoin’s network hash rate, the computing power that is dedicated to mining, is nearly halved. At that time, it was unprecedented, and the miners felt that they had no defined choice but at least to momentarily cease operations.
This time around, it is not red tape but just math threatening the miners. The price of Bitcoin dropped to 19-month lows and has put a lot of pressure on the profitability of the mining operations.
Based on previous reports, however, a mass capitulation event might not fundamentally happen, even at the current levels, amid different suggestions that miners who are required to sell Bitcoin inventory have already done that.
Hash rate supports the thesis, having dipped by a maximum of about 20% from all-time highs before rebounding, based on the estimates from data resource MiningPoolStats.
Active Addresses
The July 2021 drawdown was accompanied by a gradual slowdown in Bitcoin network activity. Active addresses, as measured by on-chain analytics platform CryptoQuant, saw a significant drop through June 2021 before rebounding in line with price in Q3.
This time around, no such drop has happened, meaning that the market is more occupied with moving their Bitcoin. This has several implications, hodlers may have become sellers as a result of low prices; traders might be looking to profit from volatility; others might be looking to “buy the dip.”
Notably, however, the general on-chain volume remains considerably low, and it means that buy-side support might be insufficient to end the downside price trend, analysts argue.
Exchange Reserves
Lastly, and despite the widely lower volumes mentioned, Bitcoin exchanges are losing coins nearly $20,000 – and quickly.
Generally, price collapses trigger inflows to exchanges as panicking traders prepare to sell and short. This time around, it would seem, really is quite different in that regard, as exchange users are withdrawing coins from accounts and not loading up.
21 major exchanges tracked by CryptoQuant now have a balance of 2.419 million BTC, down from 2.544 million at the start of Q2.
Exchange reserves in 2021 conversely surged throughout the Q2 downtrend, only resuming their drop as Bitcoin recovered.
