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Top Signals For The Crypto Bull Market
Key indicators to spot the top of the bull run and time your exit
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!
TLDR
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.
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Where Are We In The Market Using Onchain Indicators? (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 around 3.
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.
Where Are We In The Market Cycle? (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.
Bitcoin: Pi Cycle Top Indicator Zoomed In (Nov 14, 2024)
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.
Conclusion
Despite a rapid runup in price appreciation. Bitcoin is still in a fairly healthy place. Things to watch for:
MVRV Z-Score
Current Level: 3
Area Of Caution: 5 - 7
Highly Overvalued: 7+
Pi Cycle Top Indicator
Current: Widely Separated
Area Of Caution: Lines Becoming Close
Overheated: Lines Touch/Cross
Lastly, just because these indicators have worked in the past, doesn’t mean they will continue to work in the future. As mentioned above, Bitcoin is finally entering a period of mainstream adoption which could mean “this time is different.”
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