Short-term Price Dips in Bitcoin

Short-term price dips are common in bitcoin’s (BTC) bull markets. However, current declines from recent highs may indicate a deeper shift in market dynamics.

Bitcoin was trading around $84,000 during the European morning hours on Friday, reflecting a 23% drop from its January peak of $109,000. This decline has unsettled investors, raising questions about whether it signifies the onset of a new bear market or merely a fleeting correction within a broader bullish trend.

Such pullbacks are not unusual; BTC has experienced similar declines in previous bull cycles, often bouncing back to new highs. However, the CryptoQuant Bull Score Index, which gauges bitcoin’s market health, is showing signs of deeper weakness.

This index evaluates ten critical indicators—such as network activity (like transaction volume), investor profitability, and market liquidity—assigning a score from 0 to 100. Higher scores indicate a robust bullish environment, while lower scores suggest bearish conditions.

Currently, the Bull Score Index is at a concerning 20, the lowest since January 2023, when bitcoin was approximately $16,000 following the collapse of the crypto exchange FTX.

Eight out of the ten tracked metrics are showing warning signs, with network activity bearish since December 2024 and dwindling transaction volumes and liquidity.

Historically, bitcoin has only managed to maintain significant price rallies when the Bull Score is above 60, whereas prolonged readings below 40 have typically coincided with bear markets, according to the CryptoQuant analysts’ report.

Investor profitability has declined as short-term holders are facing unrealized losses, compounded by diminishing demand. U.S. spot bitcoin ETFs, once significant buyers, have seen net outflows of $180 million in the past 30 days, representing some of the highest withdrawal rates since their inception in early 2024.

In previous cycles, sustained readings below 40 for weeks or months have led to extended bear phases, such as the slump in 2022, where bitcoin lost over 60% of its value from its peak.

The upcoming weeks will be crucial. The index might rebound, indicating renewed strength, or it could remain below 40, solidifying a bearish shift that could test bitcoin’s $80,000 support zone, identified by analysts as a key level to monitor.