A key indicator for tracking the overall health of bitcoin the market just issued 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 indicator’s neutral reading 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 climbed to 50 for the first time since the downtrend began at $126,000. This figure means that exactly half of the index’s underlying indicators are now bullish, while the rest remain bearish. In other words, the indicator moved from bearish to neutral, confirming the end of the bear market, as first suggested by the BTC price rebound from near $60,000 to $78,000.
For an index that has remained stuck in bearish territory throughout this cycle, reaching neutrality is a real milestone. Note that readings below 40 signal a structural bear market, while readings above 60 indicate a strong and sustained uptrend.
But history has a warning
The CryptoQuant analyst pointed to a relevant historical precedent: March 2022, when the index rose to 50, signaling the end of the then bear market.
Like today, prices rebounded from around $35,000 to almost $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 less than $20,000 over the next few months. In other words, the bear market has deepened.
“This is the first time in this bear market that the Bull Score index entered the neutral zone (50). In March 2022, the Bull Score entered the neutral territory for about a week and then the price resumed its decline,” said Julio Moreno, Head of Research at CryptoQuant.
A turning point, not a trend
The bullish score index reaching neutrality is a significant piece of data, demonstrating real improvement in on-chain conditions rather than just price action.
However, the precedent of March 2022 reminds us that transition phases can go in one direction or the other, especially since the positioning on derivatives currently indicates a lack of conviction regarding the recovery of prices.
“Entry volumes of around 40 volumes remain moderate relative to realized volumes, skewness still favors downside protection, and the maturity structure is only slightly ascending. Positioning continues to indicate limited conditions rather than a sustained breakout,” Singapore-based QCP Capital, one of the largest digital asset trading firms, said in a market note.
