How Low Will We Go?

How Low Will We Go?

Recent market conditions have left one question on everyone’s mind — how low will we go? Crypto bear markets are notorious for disproportional losses of capital that quickly and ruthlessly disrupt the digital economy. To predict the length and magnitude of current market conditions, many individuals look to previous bear market cycles.

(Note: Since this tweet was published on June 12th, BTC and ETH prices dipped to around $20,200 and $1025 respectively, representing a -71% and -79% decline from previous all-time highs).

If history can teach us anything in crypto, it’s that things can always get worse. Those loyal to the crypto community have been hit hard by recent market trends, but historic analysis of bear market cycles suggests the worst is yet to come. However, overall market conditions are drastically different from previous bear market cycles, so it would be naive to rely on this information alone.

A Word About Cycles…

Many crypto OGs and CT personalities attempt to justify current market conditions or predict future trends using data from previous cycles (such as the tweet above). However, there is no universal method for studying crypto cycles, so take all of these theories and market predictions with a grain of salt. Nonetheless, these theories are useful for providing insight into how different individuals interpret market patterns.

Jason’s Yanowitz (@JasonYanowitz on twitter), a team member of blockworks, recently posted a twitter thread explaining his theory that bear markets can be divided into three stages. He titles the first stage, “The Unwind,” referring to the decline in bullish sentiment from narratives that contributed to the last bull market. Yano explains that in this stage, valuations decline, but companies generally postpone major decisions, such as laying off employees. 

Stage 1 doesn’t feel particularly bearish—it’s more like the calm before the storm. However, Yano argues that we are currently in stage 2 of the bear market cycle, which he calls “Forced Capitulation.” He explains stage 2 below:

It’s likely that we are somewhere in stage 2, as Yano suggests. Price charts do not provide any confidence for novice investors, and those deeply involved in the space are experiencing a bearish sentiment that’s spreading like wildfire. Every bullish narrative is quickly overtaken by the strength of the bears, and most people are holding on for dear life or searching for a glimmer of hope. 

Yano continues his thread, and names stage 3 “Bottomless Exhaustion.” In this stage, there are very few narratives that garner mainstream attention, and price action is mostly horizontal. Given recent price action, it would be hard to argue that we are in stage 3 of Yano’s framework—only time will tell if Yano’s prediction is accurate. 

By the Numbers

In the past week, the market cap of the entire cryptocurrency market, which includes all crypto assets, stablecoins, and tokens, has (roughly) fluctuated between $900 Billion and $970 Billion. Altcoins account for approximately $510 Billion of the total crypto market. The value of crypto market cap experienced a decline from $2.96 trillion in early November 2021 to just under $913 Billion as of June 16th. These are jarring numbers considering the market cap of bitcoin alone was $1.27 trillion at its peak of $69,000 in 2021.

What’s Next for NFTs?

The diversity of projects in the NFT market was one of the key drivers of the previous bull run. While it’s common consensus among crypto and NFT communities that NFTs have a role to play in the future of Web3, those less informed about NFTs and their use-cases don’t see the value in digital collectibles. To be fair, since the NFT market boomed in 2021, the space experienced an influx of new NFT collections—some legit, some scams. It’s clear that NFTs will be part of Web3, but current market conditions are not ideal for such an innovative (and technically complex) asset class. The longevity of the bear market may provide more insight into the best use-cases for NFTs in both the short and long term. 

According to Technavio, the global NFT market is expected to grow by $147.24 billion from 2021 to 2026 at a CAGR of 35.27%. This level of growth is promising for those who believe in NFTs, but those currently involved in the NFT space aren’t concerned with the potential growth of the overall market—they want to know how to navigate the current market. @Krissyos provided a twitter thread explaining his NFT bear market strategies.

@Krissyos continues to explain that during bull markets, the NFT market “rotates based on hype,” but during bear markets, the market “consolidates back into fundamental values for safety.” For those curious how @krissyos assess fundamental value, check out the tweet below: 


Who’s In Control? 

Large wallets, institutions and experienced traders will be the key agents affecting short-term market conditions. It’s unlikely that retail investors will be the driving force in turning this cycle around, given their inexperience with unstable market conditions. According to a survey conducted by Turbotax, approximately 51% of Americans who own cryptocurrency bought it in the last 12 months. This means there’s a large population of crypto-newbies who are navigating a market-downturn for the first time. However, retail investors could gain influence in the mid-to-long-term depending on the rate of crypto adoption. A recent report on Bitcoin adoption published by Blockware Intelligence predicted a Bitcoin adoption rate of 10% of the world population by 2030. The report discusses the “S-shaped” life-cycle of innovative technologies like Bitcoin, and claims we are in the later half of the “early adopters” phase. 

If we are truly in the early adopters phase, that would suggest longer periods of market instability, which could result in more volatile periods or relatively stagnant price action. Once the dust settles and the bottom is truly in, prices may fluctuate marginally, and micro-narratives may promote a false sense of bullish activity, but the speed of the market upturn will depend on the decisions of large wallets and institutions—even whales and institutions are feeling the effects of this recent crash (see figure below). If there is minimal activity from whales and institutions, it’s likely that price charts stay horizontal until the “early majority” starts to penetrate the market.


Bullish sentiment creates lofty expectations; bearish sentiment allows for periods of building and opportunity for savvy investors. It’s important to keep in mind that market downturns aren’t entirely negative. Sure, it’s painful to watch the value of your portfolio drop, but cycles are beneficial because they weed out the serious crypto-advocates from those hoping to get rich quick.

Market downturns also allow for reflection and acknowledgment of the advancement inthe crypto space in recent years. There were many narratives that spread throughout crypto communities before the recent bear market. P2E games, metaverse projects, YeildFi, NFTs—all of these domains highlighted the potential of crypto and showcased the dynamic nature of blockchain technology. The optimism in these domains greatly contributed to the last crypto bull run and it’s likely that the next market upturn will be coupled with a similar kind of market-pumping narrative. Despite an extended period of bearish sentiment, one silver lining of the recent market downturn is attractive buying opportunities. The bottom may not have happened yet, but it’s likely somewhere in sight—if it’s not, we’re in for one heck of a ride.

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