Key Metrics to Track Bitcoin’s Overall Health Since the price peaked above $126,000, the market has just given out neutral signals that the bear market may be over.
But here’s the thing: A few years ago, the indicator’s neutral reading turned out to be a false signal.
That indicator is CryptoQuant’s Bitcoin Bull Score Index, a composite indicator that measures the health of the Bitcoin market by analyzing ten key on-chain metrics, including blockchain activity, investor profitability, and liquidity.
The index climbed to 50 for the first time since the downtrend from $126,000 began. This figure means that half of the index’s underlying indicators are now bullish, while the remainder remain bearish. In other words, the indicator has turned from bearish to neutral, confirming the end of the bear market, as first indicated by the BTC price rally from nearly $60,000 to $78,000.
For an index that has been stuck in a bear market throughout the cycle, reaching neutral is a real milestone. Note that readings below 40 indicate a structural bear market, while readings above 60 indicate a strong, sustainable uptrend.
But history has a warning
Analysts at CryptoQuant pointed to a relevant historical precedent: In March 2022, the index rose to 50, marking the end of the bear market at that time.
Similar to today, the price rebounded from around $35,000 to nearly $48,000 in the weeks leading up to the signal. This price action has led many market participants to believe that the bear market that began in November 2021 near $70,000 is over.
But guess what, over the next few months, the price dropped by more than half, to below $20,000. In other words, the bear market deepened.
Julio Moreno, head of research at CryptoQuant, said: “The Bull Score index entered the neutral zone (50) for the first time in this bear market. In March 2022, the Bull Score entered the neutral zone for about a week, and then prices resumed their decline.”
A shift, not a trend
Bull Score Index reaching neutral is meaningful data that shows real improvement in on-chain conditions, not just price action.
However, the precedent of March 2022 is a reminder that the transition phase could go either way, especially given that current derivatives positioning suggests a lack of confidence in a price recovery.
QCP Capital, one of the largest digital asset trading firms in Singapore, said in a market report, “Front-end volatility around 40 remains low relative to realized volatility, the skew remains in favor of downside protection, and the term structure is only moderately upward sloping. Positioning continues to point to range-bound volatility rather than a sustained breakout.”
