Ethereum down 50%, bitcoin falls 22% MoM: Have crypto assets entered a bear market?

Bitcoin, the world's first cryptocurrency, has dropped around 22 percent from its all-time high of USD 3,000 last month, and was trading at levels of USD 2,330 at the time of filing this report, as per Coindesk price index.

"The prospect of a bitcoin fork isn't enticing for bitcoiners as it highlights the inability for the project to move forward and the divisiveness in opinions on how to do so," Charles Hayter, co-founder and CEO of cryptocurrency data platform CryptoCompare, told Moneycontrol. "The scaling debate has been around for two years now and the ramifications of the present state of play lead to a number of price-sensitive scenarios that are not positive."

Bitcoin's closest rival ethereum witnessed a phenomenal rally this year. It appreciated from levels of USD 8 in January to all-time highs of USD 400 in June, a 5000 percent rally.

Now, it has corrected over 50 percent from its peak and dropped below levels of USD 200. It was trading at levels of USD 198 at the time of filing this report, as per Coindesk price index.

When asked at what levels can there be a further correction, Hayter said: "With ethereum there is an interesting dynamic with respect to bitcoin - both are correlated in times of market bull runs or bear markets but when fundamentals to each coin comes into play there is a less synchronised movement.

"It's too difficult to call up or down - the one thing that is certain is volatility."

Contrarians Still Optimistic

Despite such a huge correction cryptocurrency experts and enthusiasts believe that this does not mark a long winter for the market.

"Too soon to tell whether this is a correction or the start of a bear market - both scenarios are likely," Hayter says.

Usually, a falling price trend where a correction of 20 percent or more from an index's peak position, over a period of two months is generally termed as the entry of that respective asset class in a bear market.

Many argue that such old-school terminology for securities does not apply to the newly born crypto-asset market. In short, given the past trend, a 20 percent decline may not necessarily mean that the crypto market has entered a bear territory.

After yesterday's correction, Muneeb Ali, co-founder of Blockstack tweeted:

Wall Street's "Black Monday" (1987) had a drop of 22.61% and went down in history books. In crypto economy that's called just a Monday.

— Muneeb Ali (@muneeb) July 11, 2017

Cryptoasset analyst Chris Burniske is of the same opinion as Muneeb and said that this correction is minor.

In 3 weeks #cryptoassets have corrected 30%. In context of historical #cryptocorrections this = minor, in context of stocks this = bear mkt pic.twitter.com/DxmtRGfNLg

— Chris Burniske (@cburniske) July 11, 2017

Any good news for crypto in sight?

There are a number of positive price kickers in the wings for the crypto markets - these come in the form of industry adoption, regulatory approval and fundamental evolution in the protocols such as scaling solutions, Hayter says.

"One major price catalyst would be other forms of adoption by industry or the cross over between mainstream financial products bridging the gap to crypto - the Winklevoss index was the first attempt at this. We will see more as volatility attracts traders, speculators and investors alike looking for some returns, hedges and diversification," he added.

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