A key indicator that tracks the overall health of bitcoin The market just issued a neutral signal for the first time since prices hit a high of $126,000, indicating that the bear market may be over.
But here’s the kicker: the indicator’s neutral reading turned out to be a false signal a few years ago.
That indicator is CryptoQuant’s Bitcoin Bull Score Index, a composite metric that measures the health of the bitcoin market by analyzing ten key on-chain indicators, including blockchain activity, investor profitability, and liquidity.
It has risen to 50 for the first time since the downtrend began from $126,000. That figure means that exactly half of the index’s underlying indicators are now bullish, while the rest remain bearish. In other words, the indicator has turned from bearish to neutral, confirming the end of the bear market, as first suggested by the BTC price rebound from nearly $60,000 to $78,000.
For an index that has been stuck in bearish territory this entire cycle, reaching neutrality is a true milestone. Note that readings below 40 indicate a structural bear market, while readings above 60 indicate a strong and sustainable uptrend.
But the story has a warning.
The CryptoQuant analyst pointed to a relevant historical precedent: March 2022, when the index rose to 50, marking the end of the bear market at that time. Just like today, prices had recovered from around $35,000 to almost $48,000 in the weeks leading up to the signal. That price action led many market participants to believe that the bear market, which began near $70,000 in November 2021, was over.
But guess what, prices more than halved to below $20,000 in the following months. In other words, the bear market deepened.
“It is the first time in this bear market that the Bull Score Index enters the neutral zone (50). In March 2022, the Bull Score entered neutral territory for about a week, and then the price resumed its decline,” said Julio Moreno, head of research at CryptoQuant.
Carry
The bullish score index reaching neutrality is a significant piece of data that shows real improvement in on-chain conditions rather than just price action.
However, the March 2022 precedent is a reminder that transition phases can go in either direction, especially given that derivatives positioning currently indicates a lack of conviction in price recovery.
“Initial volumes of around 40 volumes remain moderate relative to realized, the bias still favors downside protection and the term structure is only modestly upward sloping. Positioning continues to point to range-bound conditions rather than a sustained breakout,” Singapore-based QCP Capital, one of the largest digital asset trading firms, said in a market note.
