Timing the market top (and bottom) has always been a difficult task for every new (and well, old) trader and investor, thanks to the unpredictable and unstable human sentiment driving the trends. But that doesn’t mean it’s impossible.
By looking at the blockchain data available, we can then see and study where the market is possibly going. Although this does not guarantee anything, at least we get to avoid some major and critical dumps that could happen.
So, we have put together the charts that we think can be very helpful among crypto traders and investors when to buy and sell for the most optimal profits!
CHART 1 – PI CYCLE TOP INDICATOR
The Pi Cycle Top Indicator has historically been effective in picking out the timing of market cycle highs to within 3 days. It uses the 111-day moving average (111DMA) and a newly created multiple of the 350-day moving average, the 350DMA x 2.
For the past three market cycles, when the 111DMA moves up and crosses the 350DMA x 2 we see that it coincides with the price of Bitcoin peaking. It is also interesting to note that 350 / 111 is 3.153, which is very close to Pi = 3.142. In fact, it is the closest we can get to Pi when dividing 350 by another whole number.
Pi Cycle Top is useful to indicate when the market is very overheated. So overheated that the shorter-term moving average, which is the 111-day moving average, has reached a x2 multiple of the 350-day moving average.
Historically it has proved advantageous to sell Bitcoin at this time in Bitcoin’s price cycles.
*Also available on Glassnode.
CHART 2 – THE PUELL MULTIPLE
This metric looks at the supply side of Bitcoin’s economy – bitcoin miners and their revenue. It explores market cycles from a mining revenue perspective. Bitcoin miners are sometimes referred to as compulsory sellers due to their need to cover fixed costs of mining hardware in a market where the price is extremely volatile. The revenue they generate can therefore influence price over time.
There are periods of time where the value of bitcoins being mined and entering the ecosystem is too great or too little relative to historical norms. Understanding these periods of time can be beneficial to the strategic Bitcoin investor.
The chart above highlights periods where the value of Bitcoin’s issued on a daily basis has historically been extremely low (Puell Multiple entering green box), which produced outsized returns for Bitcoin investors who bought Bitcoin here.
It also shows periods where the daily issuance value was extremely high (Puell Multiple entering red box), providing advantageous profit-taking for Bitcoin investors who sold here.
*Also available on Glassnode and CryptoQuant.
CHART 3 – 200 WEEK MA HEATMAP
In each of its major market cycles, Bitcoin’s price historically bottoms out around the 200-week moving average. This indicator uses a color heatmap based on the % increases of that 200-week moving average. Depending on the month-by-month % increase of the 200-week moving average, a color is assigned to the price chart.
Historically, when we see orange and red dots assigned to the price chart, this has been a good time to sell Bitcoin as the market overheats.
The periods where the price dots are purple and close to the 200 week MA have historically been good times to buy.
CHART 4 – TOP CAP MODEL
The Bitcoin Top Cap model was developed by Willy Woo to identify market cycle tops. It is calculated by multiplying the Average Cap by a factor of 35. The Average Cap is calculated as the cumulative sum of daily Market Cap values divided by the age of the market in days.
Touching the Top Cap (red) historically has signaled the market cycle top.
*Also available on Glassnode.
CHART 5 – NET UNREALIZED PROFIT/LOSS (NUPL)
Net Unrealized Profit/Loss is the difference between Relative Unrealized Profit and Relative Unrealized Loss. It can also be calculated by subtracting realized cap from the market cap and dividing the result by the market cap.
A distribution top occurs when NUPL is in Euphoria, which is between 0.7 & 0.75.
This chart is available on Glassnode and CryptoQuant.
CHART 6 – MVRV RATIO
The MVRV Ratio can generally be considered within the following framework:
- High values and up-trends: The market value of the coin supply is increasing relative to the realized value (cost basis). Higher values indicate a larger degree of unrealized profit is in the system, and increases the probability that investors will distribute coins to lock in gains.
- MVRV Values > 3.5 has generally served as a strong signal for late stage bull cycles, and heightened probability of heavy distribution.
- Low values and down-trends: The market value of the coin supply is decreasing relative to the realized value (cost basis). Lower values indicate a smaller degree of unrealized profit is in the system which may signal both undervaluation and poor demand dynamics.
- MVRV Values < 1.0: indicates that a large cross-section of the supply is near break even, or held at a loss. These low values have typically provided strong signal of market capitulation and late stage bear accumulations.
This chart is available on Glassnode.
CHART 7 – MVRV-Z SCORE
The MVRV-Z Score is used to assess when an asset is overvalued or undervalued relative to its “fair value”, as underlined by the deviation between its market cap and realized cap.
The MVRV-Z Score provides a clearer picture of the market cycle with tops and bottoms normalizing around common levels.
When market value is significantly higher than realized value, it has historically indicated a market top (red zone), while the opposite has indicated market bottoms (green zone).
A blow-off or distribution top occurs when MVRV-Z Score is in the red zone, > 9.
This chart is available in Glassnode.
CHART 8 – RHODL RATIO
This indicator uses a ratio of Realized Value HODL Waves.
RHODL Ratio looks at the ratio between RHODL band of 1 week versus the RHODL band of 1-2yrs. It also calibrates for increased hodl’ing over time and for lost coins by multiplying the ratio by the age of the market in number of days.
When the 1-week value is significantly higher than the 1-2yr it is a signal that the market is becoming overheated. RHODL Ratio is able to identify with great accuracy the price high of each of Bitcoin’s previous macrocycles. It identifies the market top to within a few days accuracy.
RHODL ratio entering into the red band signals that the market is approaching the top of its cycle. This has historically been a good time for investors to take profits in each cycle.
Unlike other on-chain indicators, RHODL ratio does not give a false signal of a cycle high in April 2013. This gives it a unique advantage over other on-chain indicators.
This model is available on Glassnode.
CHART 9 – EXCHANGE INFLOW MEAN
The mean value of a transfer to exchange addresses. Only successful transfers are counted.
Over 2 BTC: High risk of dumping
Under 1.5 BTC: Safe from dumping
Below 1: Retails are active
Above 1.7: Whales are active
This indicator is available in Glassnode and CryptoQuant.
CHART 10 – EXCHANGE WHALE RATIO
Top 10 transactions divided by total inflows.
In the bull market, this indicator is likely to keep below 85%. However, in a bear market, this indicator normally keeps above 85%.
You can view this indicator on CryptoQuant.
CHART 11 – NVT SIGNAL
NVT Signal takes the total value of the Bitcoin network (which is another way of saying its market cap) and divides it by the 90-day moving average of the daily transaction value.
For BTC, any level above 150 is in the overbought zone, indicative of a market top. Levels below 45 tend to be oversold, market bottom.
This adaptation of NVT Signal adds standard deviation bands to identify when Bitcoin is overbought (red zone) or oversold (green zone). This can provide intra-cycle take profit points for Bitcoin investors.
NVT Signal can be viewed in Glassnode. While Advanced NVT Signal can be viewed here: https://www.lookintobitcoin.com/charts/advanced-nvt-signal/
CHART 12 – AVERAGE SPENT OUTPUT PROFIT RATIO (ASOPR)
Simply said, the ratio of price sold / price paid through spent outputs and is calculated by dividing realized value (USD) by the value at creation (USD).
According to this indicator, a value above 1 is usually typical in a bull and a value below 1 in a bear market. The ratio of 1 tends to act as resistance during a bear market.
This indicator is available on both Glassnode and CryptoQuant.
CHART 13 – CUMULATIVE VALUE-DAYS DESTROYED (CVDD)
CVDD has hit the historical Bitcoin price bottoms with remarkable accuracy.
We can also use CVDD together with other models/indicators.
When used in conjunction with the Top Price model, CVDD and Top Price provides upper and lower bands for price action.
When used in conjunction with CoinMetric’s Realised Price, CVDD can help visualization of Bitcoin’s accumulation bottoms.
Here are some other charts that could be helpful as well in your trading.
For catching market tops and bottoms:
1. BTC Logarithmic Growth Curves
2. BTC Investor Tool: 2-Year MA Multiplier
For catching only the bottoms:
1. Balanced Price – shows full accumulation level prior to the bull run.
2. Delta Price – wicks on the exact bottoms.
If you have any other on-chain data models or indicators that you think would be a good addition to what we already covered, please comment below.
We hope you find these charts and indicators helpful to all your future trades. Especially with crypto where volatility is the norm, we really need as much data we can get to avoid the top and confirm any bottoms if possible.
Although, it is important to note that all these charts are just interesting curiosities and are not guaranteed to work in future cycles.
As we have always said in our previous blogs, do your own research and invest at your own risk.
To the moon!
DISCLAIMER: We are in no way affiliated with Glassnode, CryptoQuant, and all other sources mentioned in this blog. All these were posted with good intent in sharing the best resources we can get for optimal trading profits.
ABOUT THE AUTHOR
Elisa is our Head of Market Analysis at Rocket Crypto X
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