Bitcoin Misery Index

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Bitcoin Misery Index (BMI)

The Bitcoin Misery Index (BMI) is a contrarian measure of Bitcoin price sentiment that ranges from 0 to 100. Created by Tom Lee of Fundstrat in 2018, the BMI combines win-rate metrics and volatility to gauge how satisfied traders are with recent Bitcoin performance.

How the BMI is calculated

  • Scale: 0–100, where 0 signifies maximum “misery” among traders and 100 indicates maximum happiness.
  • Components: primarily the percentage of winning trades (winning trades ÷ total trades) and recent volatility.
  • Interpretation: lower values signal greater trader frustration; as a contrarian indicator, very low BMI readings are treated as stronger buy signals.

Interpreting BMI values

  • 100–67: Happy — bullish sentiment dominates.
  • 66–28: Neutral — mixed sentiment.
  • 27–0: Miserable — broad trader dissatisfaction; historically viewed as a contrarian buying opportunity (the closer to zero, the stronger the contrarian signal).

Uses and limitations

  • Purpose: Acts as a proxy for investor sentiment and market psychology rather than a predictive model of price moves.
  • Useful for: Traders who use sentiment-based, contrarian strategies and who monitor shifts in market crowd behavior.
  • Limitations:
  • Backward-looking: reflects past trade outcomes and volatility, not future shocks.
  • Cannot predict exogenous events such as regulatory decisions, exchange hacks, or major institutional actions.
  • May contribute to self-fulfilling behavior if many traders act when the index hits specific thresholds.

Context and market background

  • Bitcoin has experienced rapid adoption and extreme price volatility: strong rallies in the mid-2010s and a peak near $69,000 in late 2021 followed by major drawdowns.
  • Rising interest has invited increased regulatory scrutiny and debate in various jurisdictions, affecting sentiment and price dynamics.

Threats to Bitcoin profitability and factors affecting sentiment

  • Regulatory actions: some countries have implemented bans or strict rules citing financial stability, money laundering, and fraud concerns.
  • Security risks: funds held in “hot wallets” or on exchanges can be vulnerable to hacks (notable incidents include Mt. Gox and Coincheck).
  • Market structure risks: liquidity, leverage, counterparty, and country risks can amplify trader misery during downturns.

Related concept

  • 200-day moving average: a commonly used gauge of long-term trend that averages Bitcoin’s price over the previous 200 days; often used alongside sentiment measures like the BMI.

Key takeaways

  • The BMI is a sentiment index (0–100) designed to identify when trader frustration may present contrarian buying opportunities.
  • Values below 27 are considered “miserable” and typically interpreted as buy signals by contrarian investors.
  • The index is informative about past sentiment but cannot predict regulatory, security, or other unforeseen events that drive price changes.

Sources: Fundstrat (Bitcoin Misery Index), historical Bitcoin price data.