From a historical perspective, the realized value loss across the entire cryptocurrency market over the past few months has set records, with the total cryptocurrency market cap dropping from $3 trillion to $991 billion.
A recent report from cryptocurrency research firm Delphi Digital shows that June has been particularly painful for investors after the price of bitcoin fell nearly 40%, making it one of the worst months on record.
BTC/USD monthly candle chart vs. MoM percentage change Source: Delphi Digital
Given the sharp market correction, some bitcoin price and on-chain indicators have begun to reach levels similar to previous market bottoms, but that doesn't mean traders should expect a turnaround anytime soon, as history suggests that periods of weakness may persist several months.
One of the most important factors weighing on cryptocurrencies and other risk assets is a stronger U.S. dollar.
DXY Index YoY % Change vs. BTC/USD Price YoY % Change Source: Delphi Digital
Coupled with rising inflation and falling economic indicators, the stronger DXY suggests an economic slowdown is all but inevitable, with current forecasts calling for a recession in early to mid-2023.
Against this backdrop, BTC is now attempting to form a localized bottom near the 2017 cycle high of $20,000, "the last clear structural support level on the high time frame Bitcoin chart."
BTC/USD price performance 1-week chart Source: Delphi Digital
The current cycle marks the first time in Bitcoin’s history that it has fallen below the all-time highs set in the previous bull market cycle. Delphi Digital pointed out that if BTC fails to maintain support around $20,000, it expects "support around $15,000, and if that level fails to hold, then support will be $9,000-12,000."
While these estimates seem pessimistic, it should be noted that during the first two major bear markets, Bitcoin prices fell by about 85% from peak to trough.
If the same happens in the current bear market cycle, this would bring the Bitcoin price down to $10,000, marking another 50% drop from current levels and in line with the 2018-2019 price range.
For this reason, analysts at Delphi Digital believe that "risk assets are still in for more pain."
According to Delphi Digital, the profit percentage of Bitcoin supply and Bitcoin's realized profit and loss ratio are approaching the levels of previous bear markets, but both indicators have "some room" before hitting the low point of this bear market cycle.
BTC/USD Price vs. Realized Profit/Loss Ratio Source: Delphi Digital
According to the firm, "momentum indicators and valuation indicators can remain oversold or undervalued for extended periods of time," making them "poor timing tools" for predicting the timing of reversals.
Contrarian investors may also want to keep an eye on market sentiment, and the Fear and Greed Index, which is now at all-time lows.
BTC/USD Price vs. Fear and Greed Index Source: Delphi Digital
When it comes to potential upside moves, Delphi Digital stated that “BTC has room to run due to the previous waterfall of liquidations after 3AC” and identified the next major resistance level at $28,000.
Delphi Digital says:
"Bitcoin may continue to consolidate until we see some kind of macro catalyst."
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