Bitcoin Cycle Indicator Turns Green For First Time In Years: Early Bull Or Local Top?

CryptoQuant’s Bitcoin Bull-Bear Cycle Indicator is flashing a green signal for the first time since March 2023. Here’s what it could mean for the asset.

As highlighted by an analyst in a CryptoQuant Quicktake post, the CryptoQuant Bitcoin Bull-Bear Market Cycle Indicator has signaled a shift for the cryptocurrency recently. This indicator tells us, as its name suggests, about the phase of the cycle that BTC is potentially inside right now.

The metric is based on CryptoQuant’s P&L Index, which combines the data of several key on-chain indicators to provide a single score for the network. The P&L Index’s interactions with its 365-day moving average (MA) are considered to correspond to phase shifts for BTC. The Bull-Bear Market Cycle Indicator captures this relationship by tracking the difference between the two.

When the Bull-Bear Market Cycle Indicator has a high value on either side of the scale, it means that the P&L Index is a significant distance above/below its average value from the past year. Such a trend can indicate that the asset is in an extreme phase. Similarly, the indicator being close to the zero mark can imply the market may be in a phase transition.

Now, here is a chart that shows how the metric has looked for Bitcoin recently:

As displayed in the above graph, the CryptoQuant Bitcoin Bull-Bear Market Cycle Indicator dropped to a deep negative value after the price crash at the start of February. This low in the metric coincided with an “Extreme Bear” phase reading (shaded in purple) for the market.

The indicator stayed inside this zone only for a few brief instances; however, as the cryptocurrency quickly found some stability. Throughout March and April, the metric remained in the “Bear” territory (blue), suggesting that while the P&L Index wasn’t at an extreme distance below its 365-day MA, it was still low enough to correlate to bearish market conditions.

As the price recovered, though, the Bull-Bear Cycle Indicator became less negative. And finally, with the latest continuation to the rally in May, it has left the Bear region altogether, with its value now implying an “Early Bull” phase (green).

Historically, this phase has often been followed by bullish transitions for the sector. As the chart below highlights, the signal appeared in both 2019 and 2023.

It’s also apparent in the graph, however, that a false signal also surfaced in March 2022. “Instead of confirming a new bull market, the signal marked a local top before Bitcoin continued its broader downtrend,” noted the quant. Given this, it now remains to be seen which of the two categories the new signal will fall into.

Related Reading: Bitcoin Exits ‘Panic Zone,’ But Capital Inflows Remain Weak

At the time of writing, Bitcoin is floating around $80,700, down 0.5% in the last 24 hours.