What is the Bitcoin Misery Index (BMI)?

What is the Bitcoin Misery Index ( BMI )?

The BMI Bitcoin Misery Index is an exploratory measure of Bitcoin’s movement. BMI was created in 2018 by Tom Lee. BMI ranges from 0 to 100 and uses contrasting economic indicators. And it includes several different market factors such as price, percentage of winning trades and volatility. (What is the difference between Bitcoin and Ethereum?)

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Key points  of BMI

The Bitcoin Misery Index (BMI) was created in 2018 by Tom Lee, the founder of Fundstrat Global Advisors.

This indicator includes the percentage of winning trades in total trades as well as volatility. And it is calculated on a scale of one hundred points, where zero indicates maximum misery.

When the index is below 27, it is considered “in misery”. As a contrarian indicator, the closer the indicator gets to zero, the louder the “buy” signal.

Getting to know the Bitcoin Misery Index ( BMI )

BMI was created in 2018 by Tom Lee, founder of Fundstrat Global Advisors. This index includes the percentage of winning trades to total trades as well as volatility. This value ranges from 0 to 100. When the value is below 27, it is considered “in misery”. As a contrarian indicator, the closer the indicator gets to zero, the louder the “buy” signal.

Bitcoin was created by Satoshi Nakamoto in 2009. And it is considered the first decentralized digital currency. While it has consistently remained the most popular cryptocurrency, its price remained below $20 until January 2013.

Interest in Bitcoin increased dramatically in 2016, with the price of each Bitcoin increasing by 123% by the end of the year. By 2017, investors poured into Bitcoin, pushing its price below $20,000 in December. Investors who expected the price of Bitcoin to continue to rise after December 2017 were faced with a decline of more than 50%.

 BMI- specific considerations

As interest in Bitcoin has increased, threats to its stability have also increased. Several countries have either banned cryptocurrencies or introduced significant regulations.

The South Korean government had several concerns, including embezzlement, money laundering, and the possibility of weakening capital controls. China’s concerns included the power consumption of Bitcoin miners and money laundering and fraud.

Investors in Bitcoin and other cryptocurrencies also face the possibility of having their digital assets stolen if they are stored in “hot wallets”: digital wallets that are actively connected to cryptocurrency exchanges over the Internet. Several exchanges have been hacked, with Gox losing over $450 million and Coincheck over $500 million. Those interested in learning more about cryptocurrencies can read digital currency training.

Regulatory and security uncertainty has given rise to a new type of misery index: the BMI.

Bitcoin and Forex trading

Buying and selling in the currency market (forex) includes transactions such as spot transactions, forwards, currency swaps, currency swaps and options. (What is the forex market?)

Trading exposes investors to various types of risk. including transaction risk, interest rate risk, leverage risk, counterparty risk and country risk. Unlike trading USD or EUR, cryptocurrency investors have to contend with other risks posed by assets based on a decentralized ledger. If a central bank doesn’t act as a guarantor, investors may have little recourse if something goes wrong with the cryptocurrency.

The nature of the market

The highly risky and speculative nature of investing in Bitcoin helps investors. who are able to analyze rapid price changes and understand the impact of news announcements. and perform buying or selling transactions based on this. Seeing low index levels in BMI may encourage more sophisticated investors. to automatically buy bitcoins, not to consider the purchase option. and at the same time examine other factors that may affect prices. It is likely that most of the increased demand for Bitcoin since 2016 has come from less skilled investors. (How to use CCI)

While indices are useful as early warning indicators of market sentiment, they cannot predict the future. BMI cannot predict whether a cryptocurrency exchange will be stolen or not. It cannot estimate whether the Securities and Exchange Commission (SEC) will require crypto exchanges to register as legitimate exchanges, not just internet-based platforms that allow buying and selling of bitcoins.

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