Glassnode Lists Five Tools To Help To Predict The Bitcoin Bull Cycle Top
Predicting the bitcoin bull cycle top is very difficult. Many crypto market analysts have been trying to point out exactly where the price peaks, but there is nothing that definitively points where the rally will end up. There are various tools to help to analyze where the top could be.
Whole the tools themselves are not 100% accurate, using historical data in addition to these tools can prove to be useful in not only predicting the top of the market but also helping to decide a good time to sell some digital assets and take profits.
Glassnode’s latest weekly newsletter listed five tools for predicting the market top. Each one relies on years of on-chain and market data. Every tool, however, calls the top at a different price.
Mayer Multiple
“The first tool is the Mayer Multiple, calculated as a simple yet effective ratio between price, and the 200DMA. Using statistical methods, we can establish that a Mayer Multiple value of 2.4 reflects an unlikely extreme, where price has rallied to 2.4x the long-term, and well observed 200DMA. This provides an upper pricing band, currently sitting at $110k, although it will trend higher (or lower) as the 200DMA price changes.”
“The Top Price model was originally created by Willy Woo and is an empirically fitted model, multiplying the all time Average price ($6.1k) by a factor of 35. This gives a current cycle top value of $214k. Note that the all-time-average price is much slower to change than the 200DMA, and thus the Top Price will be a less volatile top model.”
“Next is the battle tested MVRV Z-Score metric. Using statistical normalisation, this metric measures how many standard deviations the spot price is away from the realised price.
Another way to think about this metric is that very high values mean the market is holding large unrealised profits, and thus the incentive to sell is at a maximum. Conversely, bottoms can be found when the market is heavily underwater and investor capitulation is most likely underway. The current market is around ‘half-way’, after cooling off dramatically following the peak in April.”
“As bull markets progress, older hands continue to sell, and newer, less experienced buyers absorb the supply. Market bottoms are established when the smart money buys and HODLs a maximum of supply, and conversely, tops occur when large coin volumes have has transferred to mostly weak hand speculators.
The RHODL ratio captures this phenomena by taking the ratio between 1-week and 1-year old Realised Cap HODL wave bands. Simply put, it will peak when the number of very young coins is high relative to older coins. RHODL is consolidating at the moment, strangely similar to 2013, which suggests a stable equilibrium between 1-wk and 1-yr old coins.”
“Lastly we have the Reserve Risk metric, a tool that is packed full of on-chain wisdom. It can be considered as follows:
Higher prices increase the incentive to sell.
Every day a HODLer chooses not to sell, they sacrifice opportunity cost, with the expectation that prices will be higher in the future.
When more HODLers choose not to sell, fewer coin-days are destroyed, and Reserve Risk will trend lower.
As prices rise, more HODLers will eventually reach their target sell price. As a result, more coins are sold, opportunity cost is realised, and Reserve Risk will trend higher and peak at blow-off tops.
Given the remarkable accumulation that occurred over the last 6-months, Reserve Risk is impressively low at the moment. However recently elevated CDD is starting to resume the uptrend, although with plenty of gas left in the tank.”
