Bitcoin has seen little or no action in the first two days of 2023; cryptocurrency is bound to spike in volatility, but in what direction? After experiencing months of downward pressure, there seems to be no room for further losses.
As of this writing, Bitcoin is trading at $16,700 with a sideways movement over the last 24 hours. During the higher period, the price of BTC recorded the same price action. Other cryptocurrencies in the top 10 by market capitalization follow this trajectory.
Is History Repeating For Bitcoin? Pain Level Max Out
According to analyst Will Clement of Reflexivity Research, the The price of Bitcoin is approaching a critical level in Net Realized Profit and Loss Over Market Cap. This indicator measures capital gains or losses for cryptocurrency.
As seen in the graph below, the metric has approached the level of absolute capitulation when the crypto market and its participants are at their lowest. The industry approached the same level in 2018 when BTC fell from $20,000 and Ethereum from $1,400.
In 2014 and 2015, the metric dropped into the region after the collapse of the world’s largest Bitcoin exchange, Mt. Gox. Today, with the collapse of famous crypto companies, such as FTX and Three Arrows Capital, the market is close to the bottom of the previous cycle.
Clemente had this to say about this metric and its implications for the price of Bitcoin:
Capitulations, represented by net realized losses adjusted for market cap, correspond to previous macro Bitcoin fundamentals. The pain is deeply felt in this market.
Is January The Worst Month To Expect Profits?
Despite metrics and indicators showing extreme market sentiment and levels of capitulation, the timing may not be ideal for Bitcoin. Cryptocurrencies may see sideways price action and additional losses until there is a change in macroeconomic conditions.
Additional data from pseudonymous analysts show that January is historically a red month for cryptocurrency. In the past two years, the return for BTC in January was a historical exception.
Since 2015, the cryptocurrency has been trading in the red in January, recording some of its worst losses. 2023 could see BTC return to dynamic, but this period of losses may precede two months of gains.
In February and March, Bitcoin saw its best performance, as seen in the chart. These historical gains may correspond to extreme sentiment in the market and macro conditions.