The Market Cycle: Is The Cycle Over? Are We Still Early? Or Somewhere In The Middle?

Before we begin, please note that this is not financial advice. This framework is intended solely as a guide, offering data-based insights to help inform your decisions. Also, thanks to Bitcoin Magazine for providing all of this great data!

While we’re currently experiencing a bull market, it won’t last indefinitely. If you’re considering selling part or all of your holdings, it’s crucial to stay attuned to peak indicators and respond accordingly.

In the 2016/2017 crypto cycle, it felt like fewer people were calling market tops, or perhaps I was less engaged with Crypto Twitter back then.

However, in the 2020/2021 cycle, top calls were rampant, alongside the rise of the "Supercycle" narrative, suggesting that the party might never end.

Now, in this current cycle, we seem to be calling tops across monthly, weekly, daily, hourly, and even 15 minute timeframes. Although in fairness we’ve had numerous qualitative signals of a peak, especially with the President and First Lady launching their own memecoins (mania and adoption can look eerily similar). Also, many people (including myself) got burned last cycle by not clipping enough profits and roundtripping massive paper gains. There’s definitely some residual PTSD overhang from last cycle so its good people are being cautious. On the other hand, you can miss a large part of the upside move if you’re too cautious.

Each crypto bull cycle possesses it’s own unique characteristics, yet we often analyze the present cycle through the lens of past ones. It's sometimes all we have to go on. This cycle has felt particularly challenging for many compared to previous ones.

Last cycle, it seemed like holding almost any asset could benefit from the "rising tide lifts all boats" effect. In contrast, this cycle, with many more tokens and reduced barriers to token creation, has led to significant dispersion in performance.

This dispersion is a good thing. Not everything should rise or fall in lockstep.

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So, what should one do in this noisy environment?

Personally, it makes me lean even more towards quantitative data. I've noticed many people seem to be taking a guesswork approach, constantly changing their views based on short-term market movements. This might work for traders who adjust positions frequently using lower timeframe data. However, for investors with a longer-term perspective, such a strategy can be quite disruptive.

I'll share my thoughts on where I believe we currently stand at the end of this write-up.

This Week

We’re switching things up a bit

We’re Cutting:

Coinbase App Ranking

We’re Adding:

Bitcoin Dominance (BTC.D)

Everything Indicator

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Bitcoin Dominance

What Is This Indicator?

Bitcoin Dominance (BTC.D) is an indicator used to understand Bitcoin's market share relative to other cryptocurrencies and is shown as a %.

How Do We Use it?

• Rising Dominance:

  • This can signal that capital is flowing into Bitcoin from other cryptocurrencies, possibly due to Bitcoin's perceived stability or market events favoring Bitcoin. It might precede or accompany bearish conditions for altcoins.

• Falling Dominance:

  • Suggests capital might be moving from Bitcoin into altcoins, which could indicate a bullish trend for altcoins or a lack of confidence in Bitcoin's near-term performance.

Our Current Interpretation

• BTC.D is sitting at 61.45% and touched 64.43%

• We have a very small sample but BTC.D has bottomed around ~35% to 40% range previously and topped around the ~70% - 73% range last cycle.

• Last cycle, after BTC.D topped, we had a ~10 month alt season until BTC.D bottomed

• Interpretation: As Bitcoin is becoming a globally accepted asset, it’s possible that BTC.D will become less of a useful indicator over time. I don’t think BTC.D has ever been something that could be used in isolation, instead its part of a basket of things you can look at to get a rough picture of the market. Lastly, as there’s now way more market competition, its my opinion (and not a strong one) that we’re less likely to revisit the previous highs of the 70% - 73%.

MVRV Z-Score

What Is This Indicator?

The MVRV Z-Score chart helps identify when Bitcoin is highly over or undervalued compared to its 'fair value' using three metrics:

1. Market Value (black line): The current Bitcoin price multiplied by the total coins in circulation, similar to market cap in traditional finance.

2. Realised Value (blue line): Calculates the average price of each Bitcoin based on its last movement between wallets, providing a long-term valuation by filtering out short-term market sentiment.

3. Z-Score (orange line): A standard deviation measure highlighting extreme differences between Market Value and Realized Value.

How Do We Use it?

The MVRV Z-score effectively highlights periods when Bitcoin’s market value significantly exceeds its realised value, marked by the Z-score (orange line) entering the pink zone, which often indicates market cycle tops—accurately identifying cycle highs within two weeks.

It also signals when market value is well below realised value, shown by the Z-score entering the green zone. Historically, buying during these times has yielded substantial returns.

Attempting To Predict Bitcoin Price Using MVRV Z-Score

The MVRV Z-Score chart helps predict Bitcoin price extremes, signaling potential pullbacks when the Z-score reaches the upper red band and possible rallies after time in the lower green band. Historically, it has identified major price peaks within two weeks.

Our Current Interpretation

• The orange line (z-score) is currently at 2.75

• In every other bull market, the orange line (z-score) has breached 7

• Interpretation: By this metric, Bitcoin is still nowhere near what would be considered frothy overvalued territory and if this metric remains accurate, it’s likely that this cycle has a lot more room to run.

Pi Cycle Top Indicator

What Is This Indicator?

The Pi Cycle Top Indicator has been highly accurate in identifying Bitcoin market cycle highs within three days. It combines the 111-day moving average (111DMA) with a 2x multiple of the 350-day moving average (350DMA x 2).

For the last three cycles, Bitcoin’s price peaked when the 111DMA crossed above the 350DMA x 2, illustrating Bitcoin's cyclical price behavior. Interestingly, dividing 350 by 111 yields 3.153, very close to Pi (3.142), highlighting a unique mathematical pattern.

How Do We Use It?

The Pi Cycle Top Indicator forecasts Bitcoin’s market cycle peaks, predicting when the price will reach a top before declining. It operates on high time frames and has accurately identified the absolute tops of Bitcoin’s major price movements throughout its history.

Attempting to Predict An Overheated Market Using Pi Cycle Top Indicator

The Pi Cycle Top Indicator signals when the market is extremely overheated—when the 111-day moving average reaches a 2x multiple of the 350-day moving average. Historically, this has been a beneficial time to sell during Bitcoin’s price cycles.

However, since this indicator has been effective primarily during Bitcoin’s early adoption phase, it may become less relevant as Bitcoin ETFs launch and Bitcoin integrates further into the global financial system.

Our Current Interpretation

• The 111DMA and 350DMA x 2 are relatively far apart

• In previous bull markets, this indicator has shown a high degree of accuracy at calling potential tops when these two lines meet.

• Interpretation: Currently these two lines are widely separated and we will be monitoring them closely going forward. If this indicator remains accurate, it would appear as though the market is still not in overheated territory.

Everything Indicator

What Is This Indicator?

The Bitcoin Everything Indicator consolidates multiple metrics into one score to provide a comprehensive market overview. The result is a reactive, historically reliable oscillator that identifies market peaks and bottoms for Bitcoin.

It combines the following critical inputs:

• Market Profitability: MVRV Z-Score

• External Macro Supply: Global M2 Money Supply

• Miner Profitability: Puell Multiple

• Onchain Profit Taking: Spent Output Profit Ratio (SOPR)

• Volatility Trends: Crosby Ratio

• Relative Network Growth: Active Address Sentiment Indicator (AASI)

Our Current Interpretation

• This indicator is sitting at 44.97

• You want to think of selling at or before the red band (85) and consider buying at or below the green band (15)

• We’re currently somewhere in the middle

• Interpretation: Nothing appears to be overheated and this indicator would suggest we’re not close to a market peak.

Conclusion

MVRV Z-Score

Current Level: 2.75

Area Of Caution: Anything above 5

Highly Overvalued: 7+

Pi Cycle Top Indicator

Current: Widely Separated

Area Of Caution: Lines Becoming Close

Overheated: Lines Touch/Cross

Everything Indicator

Current: 44.97

Area Of Caution: 75

Highly Overheated: 85+

After analyzing all of these indicators, most of them are at their midway point to neutral. None are suggesting we’re overheated. I personally don’t think we’ve topped out for this cycle.

Are we at the beginning of the cycle? No.

(trigger warning)

In my opinion, we’re somewhere in the ½ to ¾ mark of this bull cycle.

It feels like many want to say “its all over” or we’re extremely close to the end and to go against that actually seems somewhat contrarian or frowned upon right now. They may be right! However, I’m just looking at the data that’s in front of me and what’s worked in the past. There’s no guarantees that these indicators will remain to be as accurate as they’ve been previously, but it sure feels better than licking a finger and sticking it in the air to see which way the wind is blowing.

P.S. Shoutout to Philip Swift who gave me the idea to include the “Everything Indicator”. I tend to agree with him:

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