Market Hasn't Bottomed Yet, Says Willy Woo
Bitcoin's plunge below $20,000 on Sept. 9 was an unpleasant suprise for digital assets as the majority of market participants believed that the bottom was reached back in June, but according to on-chain data provided by Willy Woo, crypto investors should brace themselves for another plunge.
In order to determine whether the market is oversold or has reached the bottom yet, the analyst uses the max pain therm determined by the percentage of coins "underwater," or unprofitable.
Have we bottomed?In terms of max pain, the market has not felt the same pain as prior bottoms. We can see this in the blue line (supply in profit by @glassnode).We have only reached 52% of coins being underwater so far.Prior bottoms were 61%, 64%, 57%. — Willy Woo (@woonomic) September 14, 2022
According to the on-chain data, only 52% of coins are currently underwater on the market, which, compared to previous cycle bottoms, is at least 5% lower than it should be to mark the current price level as the point of reversal.
Unfortunately, it is hard to determine the max pain price for the majority of the market as the positions of traders and investors are distributed unequally across different support and resistance levels. For example, a plunge below $20,000 might not cause a spike in the percentage of unprofitable coins, while a move below $19,000 would produce a large portion of open positions.
While Bitcoin's reversal seems to be postponed, the cost basis is still moving in the lower range, which means the correction should be around its latest stages, especially after Bitcoin absorbed another hit after the release of CPI data.
The recovery of the cryptocurrency market will most likely happen after the easing of the monetary policy of the United States. Once the rate hike cycle is over, the market should see the return of risk demand, and the cryptocurrency will be one of the main tools for covering it.
At press time, Bitcoin is trading at $20,300.Source