A key indicator that tracks bitcoin’s overall health the market has just flashed a neutral signal for the first time since prices peaked above $126,000, signaling that the bear market may be over.
But here’s the catch: The neutral reading on the indicator turned out to be a false signal a few years ago.
This 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 from $126,000 began. That number 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 hinted by BTC’s price jump from almost $60,000 to $78,000.
For an index that has been stuck in bear territory throughout this cycle, reaching neutral is a real milestone. Note that readings below 40 signal a structural bear market, while readings above 60 indicate a strong, sustainable uptrend.
But the story has a caveat
CryptoQuant’s analyst pointed to a relevant historical precedent: March 2022, when the index rose to 50, signaling the end of the bear market at that time.
Similar to today, prices had risen from around $35,000 to nearly $48,000 in the weeks leading up to the signal. This 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 under $20,000 in the following months. In other words, the bear market deepened.
“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.
A twist, not a trend
The bull score index hitting neutral is meaningful data that shows a real improvement in the chain’s conditions rather than just price action.
However, the March 2022 precedent is a reminder that transition phases can go either way, especially given that positioning in derivatives currently indicates a lack of conviction in the price recovery.
“Front-end volume around 40 vol remains subdued relative to realized, bias still favors downside protection and term structure is only modestly bullish. 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.
