Transcription
Most people think that bare markets end with panic, but they don't. They end with exhaustion, and almost nobody measures it properly. So, in this video, I'm going to show you two indicators that I personally rely on that barely get talked about. Yet, historically, they've been remarkably good at telling us when the bare market energy is not just cooling off, but has been genuinely exhausted. So, let's get into it.
Now, firstly, I want to get a certain misconception cleared up. Markets don't tend to actually fully bottom when things feel terrible. They bottom when selling pressure has already done its damage and there's simply no fuel left in the tank. And what I want to show you today are two ways of measuring that exhaustion directly from the data without just relying on vibes or emotional sentiment.
Now, the first metric I want to walk you through is something called the bull momentum gauge. And at its core, it measures the relative strength of Bitcoin's price action by comparing the inverted Z-score of its deviation from its one-year moving average to its own 200-day moving average. Now, that all sounds incredibly complex, but it's really not. And once you understand what it's doing conceptually, you'll realize that it's actually incredibly intuitive. Start with the yearly moving average. That's Bitcoin's long-term trend. It smooths out noise and gives you a baseline to where price should be over a full market cycle. The deviation from that moving average tells us how far price is stretched above and below that long-term trend. And by converting that deviation into a Z-score, we're now standardizing it. We're not just asking is price above or below the average. We're asking how normal is that move compared to historical behavior. And by inverting the Z-score, we now focus on positive momentum rather than negative deviation. And that inversion flips the framing from how far price has fallen to how much bullish energy is present relative to the trend. And then rather than reacting to every short-term fluctuation, we take the 200-day moving average of that Z-score. And this all essentially just smooths out the noise even further and forces the indicator to only respond to sustained shifts in momentum. And the result here is this bull momentum gauge that tells us whether bullish momentum is structurally present or absent. And it's designed to answer a simple but important question: Is price-derived momentum strong enough to justify its risk? And when the bull momentum gauge crosses into the green zone here, it signals a regime shift to the upside. It signals that the probability-weighted environment has flipped in favor of trend continuation rather than a mean reversion. Historically, these green zones align with periods where buying dips is rewarded and where trend-following strategies tend to outperform. And when the gauge falls into the red zone, it's not just about price going down here. It's about weakening momentum at a structural level. And this is where all the rallies tend to fail or where the upside moves get sold into and where the drawdowns persist for longer than most people expect.
Now, let's quickly talk about it in the context of bare markets. Bare market bottoms are actually not marked by this indicator being deeply red. That happens much earlier, as you can see on the chart. What actually matters is when the red stops getting redder and when the indicator begins to stabilize and then decisively turn green again. And historically, the most telling signals are not at the marginal crosses or the brief wicks above and below the moving average. They're the clean, decisive breaks back into the green zone after prolonged periods of suppression. So essentially, we're looking for a nice, clean, straight line from red into green. That transition tells us something extremely important. It tells us that selling pressure has already done its job. And it tells us that even in the presence of bad news, price is no longer deviating negatively from its long-term trend in an abnormal way. And in previous cycles, these transitions have consistently occurred after the majority of damage has already been done behind us, and not before. So, it doesn't catch the exact bottom tick, and it's not meant to, but what it does do is catch the shift from a regime where rallies are counter-trend bounces to a regime where rallies are now the beginning of something structurally different. And it kind of forces you to wait for confirmation that the market itself has changed its character. And right now, we can see that we're in a very clear structural momentum downtrend. This metric is sitting at some of the deepest red levels we've seen historically. But that said, deep red alone does not mean that the bottom is in. What really matters is what happens next. We want to see this indicator continue its upward trajectory and eventually make a clean move back towards the green zone. And that's the confirmation that negative momentum has actually been exhausted fully and that bullish momentum is starting to reassert itself again. So, in short, this bearish momentum and the disconnect to the price action isn't fully resolved yet. In my opinion, we're not out of the woods, but based on where it sits relative to the previous cycles, it does feel like we're at least past the halfway point of this process.
Now, let's move on to the second indicator, which I think is even more underappreciated, and that's the block subsidy to transaction fee ratio. Now, this indicator tracks the proportion of Bitcoin miner income derived from transaction fees versus block subsidies, expressed as a percentage and then smoothed over time. And visually, you can see it's displayed here as a gradient that shifts from deep green, where transaction fees make up less than 10% of miner revenue and the block subsidy dominates, through to orange and eventually red, where fees exceed 50% and miners are being paid primarily by network usage rather than issuance. Now, just to make sure everyone's on the same page, let's quickly clarify what transaction fees and block subsidies actually are in Bitcoin. Now, every time a new block is mined, miners get paid in two ways. The first is the block subsidy, and this is the new Bitcoin that gets created with each block. And it's the part that halves roughly every four years. And that subsidy is predictable. It's fixed by the protocol, and it's the primary source of miner revenue for most of Bitcoin's history. And the second component is transaction fees. And these are the fees users voluntarily pay to have their transactions included in a block. And when the network is quiet, fees are low because there's no competition for block space. But when demand surges and lots of people are trying to transact at the same time, users start bidding against each other, and the fees rise sharply. So, when we look at the ratio between the block subsidies and the transaction fees, what we're really measuring is where the miner income is coming from. Are miners being paid mainly by new issuance, which tends to happen when the network is quiet, or are they being paid by users competing for block space, which only really happens when demand, urgency, and speculation are pretty high? And that's why its ratio is such a powerful proxy for underlying network behavior and sentiment. It's definitely one of the most powerful and most misunderstood sentiment indicators in Bitcoin.
So, in essence, transaction fees are not being paid because people are optimistic. They're paid because people are competing for block space, and that competition only exists when demand to transact is high, or urgency is high, or that speculation or usage is just intense. In other words, fees spike when the network is emotionally and economically crowded. And during bare markets, the absolute opposite happens. Interest completely wanes and speculation dries up. And as you can see, on-chain activity starts to slow down. And as a result, transaction fees collapse, and the miner revenue becomes almost entirely dependent on the block subsidy itself. And historically, Bitcoin bare markets are cleanly defined by periods where the block subsidy to transaction fee ratio flattens out to very low single-digit levels, typically to around 4% to 5%. And what's important here is not just that the ratio is low, but that it stays low for a long time. And that prolonged flatlining tells us that interest hasn't just dipped, but it's been exhausted. There is no urgency at all, and there's no crowd. And that means that there's no speculative pressure that's forcing users to pay for block space. And then contrast that with what happens at market peaks. The peaks on this metric consistently occur at or near local price euphoria. And the reason is straightforward. During euphoric phases, everybody wants in at the same time. Traders are rotating, leveraging, arbiting, minting, redeeming, just moving coins all over the place. And long-term holders start distributing. And all of that activity competes for limited block space. And then the fees explode. And that's why this metric spikes red at the top. Not just because price is high, but because the behavior is now frantic. And the most recent clear peak on this metric occurred during the post-ETF rally to around $70,000 last year. And that period marked the last phase of genuine, observable euphoria that we've had this cycle, where on-chain activity actually surged. And as we can see here, the metric spiked as fees surged and the network became crowded. But since then, something very different has happened. Despite price eventually rallying beyond $100k, the block subsidy to transaction fee ratio has now been in a persistent decline. And today, it's hovering around 1% to 2%, which is some of the lowest readings we've had on record. And if that's making your eyebrows raise, then it should. Why would fees be collapsing while prices are still making new highs? And the answer to that is that this rally was not driven by on-chain frenzy. It was not driven by mass speculation or transactional urgency. It was driven largely by steady, passive flows and custodial accumulation by treasuries. So, what we ended up with was price advancing without the usual behavioral footprint of euphoria. And that matters because historically, true cycle tops tend to coincide with emotional excess and not apathy like this. So, what it suggests is that instead of a blow-off top, we may have just been seeing a topping process characterized by indifference, a slow bleed scenario, which we've talked about a few times before, multiple failed expansions, lower engagement, lower fees, and lower urgency. Or, in other words, this has been a market that's topped not just because everyone was euphoric, but because nobody really cared enough to sustain the demand to match the extreme amount of long-term holders selling. And that's the honest truth.
So, when you combine this here with the bull momentum gauge staying suppressed or failing to reclaim those green zones, a very different picture starts to emerge. One where the market may have actually already been in a bare market for a while now, and not defined by panic, but by attrition. A slow series of dead cat bounces rather than a single massive flush. And this is where these two indicators really shine when you view them together. The bull momentum gauge tells us when price-derived momentum has structurally shifted, while the block subsidy to fees ratio tells us whether the Bitcoin network itself is alive with demand or quietly dormant. When both of these metrics are suppressed like they are now, history has been very clear. We are not in a healthy bull market environment, regardless of what price alone might be doing in the short term. And when they begin to turn, not suddenly or violently, but in a slow and decisive way, that's where the real opportunities have tended to emerge. Not at peak fear, and not at peak excitement, but at peak exhaustion, when the market has already done the hard work of washing out weak momentum.
So, does the macro backdrop still look positive going into next year? Well, in my view, yes, it does. But is momentum right now sitting at extreme negativity? Well, I also believe yes. And when you put those two things together, it increasingly feels like that we're well past the halfway point of this process, moving ever so closer towards the kind of exhaustion that typically marks the true end of bearish price action. So, the key takeaway for me here is simple. Don't confuse price with progress. Markets don't bottom because everybody suddenly feels bullish again. They turn when momentum is exhausted and participation dries up. So, if you can stay patient while momentum rebuilds and demand quietly returns, you put yourself on the right side of the regime shift, not chasing it after the fact.
So, do you think this feels more like a slow, exhausting bare market, or are we still missing that one final emotional move? Drop a comment down below. And thanks again to everyone who's tuned in throughout the whole of 2025. The support has been unbelievable, and I'm looking forward to hitting the ground running with a lot more content going into 2026. So, I hope you all have a great new year, and I'll catch you all in the next one.