Bitcoin's Misery Index Surpassed Mid-2016 Highs, Indicating BTC Bear Market “Likely Ended”

Francisco Memoria

Tom Lee, a Wall Street strategist covering bitcoin and the co-founder of Fundstrat Global Advisors, has recently revealed his contrarian indicator, the Bitcoin Misery Index (BMI), recently hit levels it hadn’t since July of 2016, which indicate “the bear market for Bitcoin likely ended at $3,000.”

Lee, often seen as a permabull, introduced the BMI back in early 2018. The momentum indicator ranges between 0 and 100, and sees bitcoin have its “best 12-month performance” when it drops below 27 (hits misery), and has seen BTC experience various bull runs after hitting said level.

As of April 4, the BMI hit 89, its “highest reading since June 2016,” which to Tom Le bring both good and bad news. This, as bitcoin’s BMI has only surpassed 67 since 2011 during bull markets, and as there’s usually a correction of about 25% after hitting its peak.

The indicator measures bitcoin’s momentum based on its price and trading activity, incorporating the percentage of winning trades within it. Although the indicator wasn’t created to predict bitcoin’s price, it seems to be pointing towards an incoming correction.

Tom Lee’s conclusion, taking the indicator into account, is that the “BMI reaching 67 is further evidence the bear market for Bitcoin likely ended at $3,000.”

Last year, Lee predicted BTC’s price would reach $25,000 before 2019, but is prediction didn’t come true. In fact, the flagship cryptocurrency fell to a $3,200 low in December, at about the same time the Wall Street analyst claimed the market was wrong about bitcoin.

In February, Lee revealed he believes the “fair value” of the flagship cryptocurrency was a “lot higher” than the price it was currently trading at. Since then, BTC has reached a high of little over $5,000, and is currently trading at $5,090 according to CryptoCompare data.

BTC Now Below $8300, but Tom Lee Says ‘2020 Should Be Great for Bitcoin’

Siamak Masnavi

On Thursday (January 23), Thomas Lee, Co-Founder, Managing Partner, and the Head of Research at independent research boutique Fundstrat Global Advisors, while appearing as a guest on CNBC's post-market show "Fast Money", predicted that "2020 Should Be Great for Bitcoin" and explained why.

According to data from CryptoCompare, at press time (around 10:20 UTC on January 24), Bitcoin is trading at $8,273:

BTC-USD 24 Hour Chart on 24 Jan 2020.png

This is the first time that Bitcoin has traded below the $8,300 level since January 14, as you can see in the two-week BTC-USD price chart shown below:

BTC-USD 2 Week Chart on 24 Jan 2020.png

Since Bitcoin reached $9,151 at 01:00 (UTC) last Sunday (January 19), the BTC price has been steadily falling, perhaps in anticipation of the "traditional" slowdown in Bitcoin trading around the time of the Chinese New Year (which, this year, starts on 25 January 2020 and ends on 11 February 2021). This expected drop in Bitcoin trading volumes was something that Arthur Hayes, Co-Founder and CEO of crypto derivatives exchange BitMEX, predicted in a tweet he sent out yesterday:

However, Lee, does not seem concerned about the currently falling prices of Bitcoin and altcoins in the crypto market.

Lee, who was appearing on Fast Money to give his views on the stock, bond, and crypto markets, was asked by the shows's host, CNBC news anchor Brian Sullivan, if he was still bullish on Bitcoin.

Lee replied:

"Yeah, 2020 should be great for Bitcoin because you got number one the halvening happening -- the block reward for miners getting cut in half -- that's a good supply demand change. I think last year the White House killed the Bitcoin rally with their opposition, but with the presidential election cycle underway, it's not gonna be in the headlines, and that's bullish for Bitcoin. And then with geopolitical tensions in the Middle East, I think that's good for crypto... We're getting a lot more interest in it from our clients."

It is worth remembering that two weeks ago Lee tweeted about a report he had published on January 9 about the outlook for crypto in 2020. According to this report, there are three positive convergences/catalysts for Bitcoin in 2020:

  • Bitcoin halving/halvening (which is expected to take place around 12 May 2020).
  • Geopolitical tensions in the Middle East.
  • 2020 U.S. Presidential Election

Lee said at the time that the bottom line is that "financial markets tend to discount 1-3 months, and maybe 6 months (max)" and therefore the "highest probability is halvening not priced in."