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Investors expect Bitcoin and Ethereum to decline in the next 3 months

 


Crypto markets have accepted UST's exit and LUNA's subsequent downward spiral, both of which have impacted the price of Bitcoin and the entire spectrum of digital assets. According to a recent report by the Glassnode team, the Bitcoin market has been in the red for eight weeks, marking the “longest uninterrupted streak of weekly red candles in history.”


A similar picture emerged for Ethereum, the most popular altcoin. Bear market swings hurt yields and profit margins directly or indirectly. To make matters worse, derivatives markets are forecasting further declines over the next three to six months.


Derivatives markets point to more pain for Bitcoin

According to derivatives markets, the outlook for the next three to six months remains fearful, which could mean a further decline. On-chain, the report says, blockspace demand for Ethereum and Bitcoin has fallen to a multi-year low, and the rate of ETH burn via EIP1559 has hit an all-time low.


Glassnode has calculated that the demand side could mean further losses are on the cards for both Bitcoin and Ethereum due to poor price development, uncertain pricing of derivatives and extremely low demand for blockspace. The report explains:


A look at the chain shows that both Ethereum and Bitcoin blockspace demand have fallen to multi-year lows and the burn rate of ETH above EIP1559 is now at an all-time low.


The combination of poor price action, fearful derivatives pricing, and extremely weak demand for blockspace in both Bitcoin and Ethereum allows us to deduce that the demand side is likely to continue to face headwinds.


Bitcoin and Ethereum price performance has been disappointing over the past 12 months. The long-term CAGR rates for Bitcoin and Ethereum have been affected as a result.


Additionally, Bitcoin has had a 30% negative return in the short term, meaning it has corrected by 1% on average each day. This negative return for Bitcoin is very similar to previous bear market cycles. As for ETH, the altcoin fared far worse than BTC. Ethereum monthly return profile paints a depressing picture of -34.9 percent. Even in the long run, Ethereum seems to be making less and less profit.


Additionally, over the past 12 months, the 4-year CAGR for both assets has fallen from 100% to just 36% for BTC and 28% for ETH.


To make matters worse, the derivatives market has warned of future market declines. Near-term uncertainty and downside risks continue to be priced into options markets, particularly over the next three to six months. In fact, implied volatility increased significantly during last week's market sell-off.


Glassnode analysis concluded by stating that the current bear market has taken its toll on crypto traders and investors. Additionally, the Glassnode team emphasized that down markets often deteriorate before they recover. However, “bear markets tend to end” and “bear markets are the originators of the bull market that follows”, so there is some light at the end of the tunnel.

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