Both optimism and pessimism have greeted the recent surge in Bitcoin's (BTC) price, which has increased by 40% in the previous month despite continuing contagion effects generated by the demise of centralized crypto players. Since then, both ether (ETH) and the markets for decentralized finance (DeFi) and the general equity market have grown, and so has the value of cryptocurrencies. Earlier this week, the price of bitcoin climbed above $23,500 for the first time in five months before falling back as investors took profits.

As the cryptocurrency industry dealt with the bankruptcy of cryptocurrency exchange FTX and general pessimism about the future of global stock markets, the price of bitcoin dropped to a November low of $15,700. Until January 1, prices were between $15,700 and $17,500. Based on the available on-chain data, it appears that bitcoin's short-term holders (STH) are unloading their holdings at a profit while the long-term holders (LTH) continue to hold massive spot positions. This development "looks increasingly bullish for bitcoin." Although analysts disagree on whether the market is bullish or bearish, recent pricing and on-chain data may indicate that bitcoin is nearing the end of its bear market. The macro sentiment, however, continues to be a cause for concern.

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However, last week saw the lowest selling pressure on bitcoin from miners, an essential part of the Bitcoin ecosystem, in three years. In exchange for "rewards" (tokens), miners contribute computing power to a blockchain network. Mine operators must constantly sell these rewards to cover their substantial operating expenses. Many miners declared bankruptcy and sold off their assets last year, adding to market selling pressure. Bitfinex analysts noted that "since the asset class is currently highly correlated to the US stock market," negative macro developments could limit bitcoin's ability to repeat its previous successes. Declining miner sales are often interpreted as optimistic because they indicate less selling pressure coming from the people producing the coins. According to on-chain flows, the volume of bitcoin moving from miner addresses to exchanges' wallets has dropped to multi-year lows, as reported by CoinDesk last week.

Reasons for a Potential Market Crash Over

Recent weeks have seen the widespread panic in the bitcoin market, a condition frequently seen at or around major market bottoms. In 2018, Bitcoin lost about 85% of its value, making it the year of its most dramatic collapse ever. The drops look so extreme, though, because this is the first time that a Bitcoin bear market has been front and center in the eyes of the media and the public at large. Bitcoin has experienced multiple bull/bear cycles, during which the digital asset rose sharply before plunging by as much as 90%.

If we examine a historical chart of Bitcoin's price movement over a significant period, we can observe that the cryptocurrency has seen three distinct bull markets. During the first, Bitcoin's value increased from about $2 to around $200, or over 10,000%. During the second, Bitcoin's value increased from around $50 to around $1,200, or around 2,300%. During the third, Bitcoin's value increased from around $200 to over $19,500, or nearly 10,000%. Now, after each of these waves, we had a significant washout or bear market. Bitcoin dropped from around $200 to $50 (or 75%) after the first wave, around $1,200 to $200 (or 83%) after the second wave, and around 84% after the third wave.

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Furthermore, if we examine the chart patterns, they appear to be very similar in terms of losses following a bull market surge. The latest downturn resembles the collapse of 2014 and 2015 very closely. In both circumstances, prices first fall steadily before plunging sharply for a short time. Following this, they recover, level off, then start to rise slowly again.

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