Bitcoin: Retail Buyers Are Gone

There is little debate now that we are currently in a bear market.  Even those with the most conviction have slowly come to this conclusion as well.  The question now isn't if we are in the bear market, but has now switched to "Just how low are prices going to go?"  Have prices hit the bottom, or is there much more pain on the horizon for crypto holders?

The thing that you need to realize is that a bottom won't be reached until the market has run out of sellers.  When the price of Bitcoin, Ethereum, and other crypto reach a point so low that people simply refuse to sell.  Every cycle, this doesn't happen until regular retail buyers capitulate and sell out of their positions.  Oftentimes, they will leave the crypto market declaring it is a scam, Ponzi, or a waste of money.  These are all signs that we getting closer to the eventual price bottom.   Unfortunately, for this to happen, the crypto or projects that these retail buyers were so passionate about, must die as well.

If you have been paying attention to the crypto markets the last few months, this is something that we have been seeing constantly.  In the last cycle, one of the most appealing opportunities offered by crypto was the ability to lend out your Bitcoin, Ethereum, and other crypto lending services to earn interest.  As everyone knows, the world is going through a difficult financial situation, and it is becoming more difficult by the day just to afford daily necessities.  Earning interest on your cash in the bank for most people is no longer a viable option.  With most banks offering interest so low that is practically nothing.  Some banks are even charging their customer's negative interest rates to keep funds in their banks.  People were looking for any way possible to catch a break and finally get ahead.  This is why crypto lending services were so appealing.  During the peak of the lending market, it was common to find lending rates of Bitcoin around 6-7%+, over 10% for stablecoins, and more.   But as we all know, during the summer this market would completely collapse.  Some of the biggest services becoming insolvent, such as Celsius, Voyager, Vauld and the list goes on. And then there was the Luna/UST collapse that took place as well.  So many retail buyers had fallen in love with the idea of earning nearly 20% interest on their UST that was being lent out on Anchor.  Only for those cryptocurrencies to be de-pegged and essentially go to zero.  So many people either had the value of their crypto go to zero, or had their funds frozen on services that became insolvent.  If these users ever see their funds again, it is likely that they will only receive cents on the dollar back.  All of these people, several thousands of them, have now become sour on not only the crypto markets but these lending markets as well.  Many of them leaving the crypto markets vowing to never come back.

The next bull market will not occur until a large number of these retail buyers return to the crypto market.

The lending chaos that took place over the summer was the first domino to fall that caused retail buyers to rush out of the crypto market, but it certainly wasn't the last.  In the last few months, we have seen the NFT market essentially disappear.  In fact, NFT volumes have fallen by a shockingly 97% from the summer highs.

My personal opinion on NFTs has always been that they have great potential in the future, but in their current form were mostly the newest crypto FAD that was destined to disappear.  Similar to how ICOs were the hottest thing during the previous bull cycle, only for them to become nearly nonexistent.  Meme coins had a similar story as well. NFTs were even more popular this time around.  Maybe those profile pictures, or NFTS of rocks selling for literally hundreds of thousands of dollars should have been a red flag.  The key difference between NFTs and regular crypto is that NFTs are much, much less liquid.  If you have Bitcoin, Ethereum, or any of the other top cryptocurrencies.   It is extremely easy to sell your coins anytime you want.  But, that's not how NFTs work.  In order for you to sell your NFT, you must find an actual buyer.  If no one wants your NFT, then you are stuck holding the bag.  That is exactly what has happened. While there are a few projects that may always have demand, such as Crypto Punks and Bored Apes.  99.9% of NFTs will have no value, and the people who bought them hoping to sell for quick profits.  Will learn a hard lesson about how important liquidity is.  It is likely that a large majority of these NFT buyers have also left the market and probably have a worse impression of crypto than they had just a few months ago.

As if those two market collapses weren't enough, we also need to consider what is happening in the world right now as well.  Prices of everything are going through the roof.  Many people simply can't even afford to fill up their cars with gas, heat their homes, or pay for food.  Things have become difficult and there is no guarantee that they will be improving anytime soon.  This too has eliminated a large number of retail buyers who would normally be buying Bitcoin and other cryptocurrency each time they are paid.  Instead, having to shift their focus on just surviving and providing for their families.

What does this all mean?

This information shows us that we are definitely in a bull market, but that the price bottom of Bitcoin might be much closer than we thought. While there will be price movements up and down.  For the most part, the people who are still in the Bitcoin market are those with the deepest conviction.  The HODLers, and those who have the most confidence in where they believe the world is heading.  While Bitcoin is currently sitting within a price range of $18-$20k.  It's likely we have reached a price point where the people in the market just refuse to sell.  This means that we could soon see Bitcoin's price begin to recover, and dare I say, become un-correlated with other financial markets.  Time will tell.  One thing is for certain.  In order to reach the moon prices that we have all dreamt about.  There will need to be another stampede rush of retail buyers back into the crypto markets. But what would be the next catalyst to make that happen?

How about you? Is Bitcoin's price close to its bottom? What will bring back retail buyers?

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As always, thank you for reading!