Price fluctuations in the short term are a typical occurrence during bitcoin’s (BTC) bullish phases; however, an indicator suggests that the recent decline from its previous highs may indicate a more significant shift in market dynamics.
As of Friday morning in Europe, bitcoin was priced at approximately $84,000, reflecting a 23% decrease from its January high of $109,000. This drop has unsettled many investors and sparked discussion over whether this signals the onset of a new bear market or simply a brief correction amid a larger bullish trend.
Such downturns are not unheard of—BTC has experienced similar setbacks in prior bull markets, typically bouncing back to achieve new record levels. Nonetheless, the Bull Score Index from on-chain analysis firm CryptoQuant, which serves as a composite gauge of bitcoin’s market condition, indicates signs of fundamental weakness.
This index assesses ten vital metrics ranging from network activity (like transaction volume) to investor profitability and market liquidity, scoring from 0 to 100. Higher scores reflect a strong bull market, while lower scores point to bearish trends.
Currently, the Bull Score Index is at a concerning 20—the lowest point since January 2023, when bitcoin was trading around $16,000 following the collapse of the prominent crypto exchange FTX.
Of the ten metrics monitored, eight are signaling caution, particularly with network activity remaining sluggish since December 2024, alongside diminished transaction volumes and liquidity.
“Historically, bitcoin has only managed to maintain significant price increases when the Bull Score exceeds 60, while sustained readings below 40 have correlated with bear markets,” analysts from CryptoQuant noted in their report on Thursday.
Investor profitability has diminished as many short-term holders are experiencing unrealized losses, with demand decreasing—U.S. spot bitcoin ETFs, known for aggressive buying, have seen a net outflow of $180 million in the past month, marking some of the highest withdrawal rates since beginning trading in early 2024.
In earlier market cycles, prolonged readings below 40 for several weeks or months have often preceded lengthy bear periods, such as the 2022 decline when bitcoin lost over 60% of its peak value.
The forthcoming weeks will be crucial. The index could either recover, indicating renewed strength, or it may settle below 40, reinforcing a bearish trend that may challenge bitcoin’s $80,000 support level—an area that analysts consider essential to monitor.