Bitcoin has continued its upward trend this week, successfully reclaiming and maintaining its position above the $85,000 threshold. This upward movement reflects a weekly increase of around 4.7%, suggesting a potential shift in momentum after several weeks of stagnant and bearish behavior.
While recent gains are encouraging, indicators that could define Bitcoin’s next significant movement have started to surface. Notably, an in-depth analysis of market health and investor psychology has emerged alongside the current BTC price activity.
On-chain metrics and sentiment analysis are being utilized to determine whether this current uptick signals the continuation of the bull cycle or if the market is on the verge of transitioning into a new phase.
A framework shared recently by CryptoQuant contributor Woominkyu provides a comprehensive perspective on Bitcoin’s positioning through the Bitcoin Combined Market Index (BCMI).
Evaluating Market Health via BCMI Metrics
Woominkyu notes that the BCMI offers a broad overview of Bitcoin’s market state by consolidating four essential metrics: MVRV (30%), NUPL (25%), SOPR (25%), and the Fear & Greed Index (20%).
Each metric represents crucial aspects of network valuation, investor sentiment, realized gains/losses, and prevailing market emotions. The index assigns specific weights to each metric, calculating a combined score that can indicate whether the market is in an overheated state or undervalued.
Historically, a BCMI score below 0.15 signifies extreme fear and potential buying opportunities, while scores above 0.75 often precede market peaks or significant corrections.
Currently, the BCMI sits below the 0.5 mark, suggesting that Bitcoin has yet to enter the overheated territory. Woominkyu identifies two potential scenarios: the market may be experiencing a standard correction within a continuing bull cycle, or it could be signaling early signs of an unusual shift towards a bearish phase.
The moment of decision for Bitcoin
“In this current market cycle, BCMI hasn’t yet reached the typical ‘overheated’ zone (above 0.75). It’s currently hovering below 0.5, suggesting we’re at a pivotal market juncture.” – By
@Woo_MinkyuRead more
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Crucial Thresholds to Monitor in Bitcoin
The analyst emphasizes the significance of observing the 7-day and 90-day moving averages of the BCMI for clearer market direction.
If the index begins to trend upwards, it may indicate a resurgence of momentum and a potential return to elevated price levels. Conversely, a sustained downturn could validate a broader trend reversal. Meanwhile, IntoTheBlock has recently highlighted on-chain resistance zones for BTC.
The market intelligence platform particularly underscores the $97,400 level, noting that this is “where approximately 1.44 million BTC are currently holding at a loss,” implying that if BTC reaches this price point, a pullback could occur.
Is Bitcoin on its way to test its highs?
The red bubbles in this chart highlight levels where underwater investors could sell as they break even, especially if uncertainty lingers.
A key zone is around $97.4k, where approximately 1.44 million BTC are currently experiencing losses.
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Featured image created with DALL-E, Chart from TradingView
