The Bitcoin market is now down for the eighth straight week, marking the longest straight red weekly candle in history. Even the largest altcoin, Ethereum, painted the same picture. Well, such a bearish move will directly or indirectly affect the yield/earnings margin.
To make matters worse, derivatives markets have signaled fears of further declines, at least for the next three to six months.
revenue decline
Price/performance over the past 12 months has been poor for both Bitcoin and Ethereum. Indeed, this has impacted the long-term CAGR ratios of Bitcoin and Ethereum. Glassnode’s weekly report Publishing We highlighted this scenario on May 23rd.
The seriousness of the bear market #Bitcoin And #Ethereum
This week, we analyze the diminishing returns profile of both. $BTC + $ETHAnd what market structure and on-chain usage will tell us the way forward.https://t.co/5KK6xBLVUg
— Glassnode (@glassnode) May 23, 2022
Considering the largest cryptocurrencies, BTC traded within a bull/bear cycle of around four years, often associated with a halving. Looking at the long-term compression of returns, the CAGR has decreased from over 200% in 2015 to less than 50% as of this writing.
Source: Glassnode
The report added:
“In particular, we can see a significant decline in the four-year CAGR after selling in May 2021. we argued This is most likely the start of a dominant bear market trend.”
Additionally, Bitcoin has yielded minus 30% in the short term, corrected by an average of 1% per day. This negative return is very similar to Bitcoin’s previous bearish cycle.
Source: Glassnode
Moving to ETH, altcoins performed relatively poorly compared to BTC. The monthly return profile shows that Ethereum posted a sad picture of -34.9%. In the long run, Ethereum also appears to see a decline in revenue over time.
Additionally, over the past 12 months, the four-year CAGR of both assets has decreased from 100% per annum for BTC to 36% per annum. It also highlights the seriousness of this bear at 28% per year for ETH.
Source: Glassnode
The report further added:
“ETH has generally outperformed BTC in a bullish trend, but this difference seems to weaken over time (lower upward divergence). In a more bearish trend, we can see that ETH CAGR often tends to underperform BTC. .”
To make matters worse, the derivatives market has warned of further declines in the market. Options markets continue to price with short-term uncertainty and downside risks, especially over the next three to six months. Indeed, implied volatility increased significantly during the sell-off period last week.
Source: Glassnode
In particular, it is not surprising that the market has shown a notable preference for put options due to a heavily bearish market going on and an unimpressive price performance. The put/call ratio for open interest has risen from 50% to 70% over the past two weeks as the market hedges against further downside risk.