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CandleFocus Glossary Editor
Bitcoin has grown to become one of the world’s most popular digital currencies and its strong performance over the years has made it one of the most exciting investments. But many investors still don’t understand the nuances of the market, and there is no concrete way to evaluate the potential of Bitcoin.
Enter the Bitcoin Misery Index (BMI), created in 2018 by Tom Lee, a co-founder of Fundstrat Global Advisors. The BMI is designed to provide investors with a better understanding of the market and gives them a tool that can be used to determine whether investing in Bitcoin is a good chance.
The BMI is an index of how much pain Bitcoin is inflicting upon its holders. The index incorporates two main components: the percentage of winning trades to total trades, and the volatility of the coin. The index is calculated on a 100-point scale, where a score of zero indicates maximum misery. The higher the BMI value, the more painful it is to hold Bitcoin and the more likely you are to sell it at a lower price. Conversely, the lower the score, the less miserable it is to hold Bitcoin; therefore, Tom Lee believes that anywhere below 27 on the BMI indicates a good time to invest.
At its core, the Bitcoin Misery Index is a contrarian index. When the index is close to zero, it may be interpreted to signal investors to "buy," as people will start to sell their holdings as the score indicates more pain. Conversely, when the index reaches a score near 100, it typically signals that Bitcoin has had a long run of success and sells may be ready to sell; thus a good time to sell.
The Bitcoin Misery Index is a useful tool for anyone interested in Bitcoin investing, but it should be used in conjunction with other forms of analysis. The index can be used to gauge investor sentiment and should be used to help inform decisions on when to buy and when to sell. It can also provide insight into when it may be a good time to enter the market or when it may be wise to stay out of it. Ultimately, the BMI is just another tool in every investors’ toolkit.
Enter the Bitcoin Misery Index (BMI), created in 2018 by Tom Lee, a co-founder of Fundstrat Global Advisors. The BMI is designed to provide investors with a better understanding of the market and gives them a tool that can be used to determine whether investing in Bitcoin is a good chance.
The BMI is an index of how much pain Bitcoin is inflicting upon its holders. The index incorporates two main components: the percentage of winning trades to total trades, and the volatility of the coin. The index is calculated on a 100-point scale, where a score of zero indicates maximum misery. The higher the BMI value, the more painful it is to hold Bitcoin and the more likely you are to sell it at a lower price. Conversely, the lower the score, the less miserable it is to hold Bitcoin; therefore, Tom Lee believes that anywhere below 27 on the BMI indicates a good time to invest.
At its core, the Bitcoin Misery Index is a contrarian index. When the index is close to zero, it may be interpreted to signal investors to "buy," as people will start to sell their holdings as the score indicates more pain. Conversely, when the index reaches a score near 100, it typically signals that Bitcoin has had a long run of success and sells may be ready to sell; thus a good time to sell.
The Bitcoin Misery Index is a useful tool for anyone interested in Bitcoin investing, but it should be used in conjunction with other forms of analysis. The index can be used to gauge investor sentiment and should be used to help inform decisions on when to buy and when to sell. It can also provide insight into when it may be a good time to enter the market or when it may be wise to stay out of it. Ultimately, the BMI is just another tool in every investors’ toolkit.