- Some Bitcoin indicators and metrics are better than others at determining if the top is in.
- Neither you nor I will figure out the exact top, that’s a fool’s errand – be prepared to leave some profits on the table.
Bitcoin [BTC] headed towards its all-time high again after being rejected at the $69,000 level on March 5. Whales bought the dip and daily miner compensation was at its highest level since December 2021.
AMBCrypto reported that based on these statistics we are in the middle of a bull run. Once Bitcoin enters price discovery territory, how does the average investor know when to cash out?
Round numbers are not your friend
Some investors may have made plans for themselves, something along the lines of “if Bitcoin reaches $150,000, I will sell all my BTC holdings.” It could be any other crypto asset, targeting a round number of $1, $10 or whatever.
However, these objectives are not based on data or technical analysis. While individuals may not have the time or expertise to attempt to time cycle tops, some indicators and metrics can help make this decision for you.
Source: BTC/USD on TradingView
Enter the Pi Cycle Top indicator. It is a series of simple moving averages on the daily chart. The longer one is a period of 350 * 2, while the shorter one is a period of 111. A crossing of the shorter over the longer indicates that the top of the cycle had been reached.
The years 2021, 2017 and 2013 were all correctly predicted by this indicator. That does not mean that some of the profits are still left behind. The 2021 rally saw the highest signal at prices of $64,000, while Bitcoin eventually reached $69,000 in November 2021.
One point of criticism of the indicator is that it does not provide information about a possible bottom. Another is that it is not forward-looking.
The MVRV ratio above 3.7 on CryptoQuant has also been a decent top indicator since 2011, although the data shown above is only up to January 2016.
On February 20, 2021, the reading stood at 3.9, with BTC prices at the highest level on the day at $57.5k. Again, it’s not as close to the $69,000 top as investors would like, but still pretty close.
Not all metrics may be appropriate
The Puell Multiple shown above is another reliable indicator. A value of 6 or higher indicates a potential top, and 0.4 or lower indicates a potential bottom.
While the metric was great in helping reach the 2023 bottom, it failed to rise above 3 during the 2021 run. Therefore, its accuracy is worse than the other two discussed previously.
A reading of 3.7 on the MVRV, or a Pi Cycle Top signal, will not cause Bitcoin prices to plummet. It is just a small part of the complex web that traders and investors must walk and make informed decisions at crucial intersections.
How much is 1, 10 or 100 BTC worth today?
AMBCrypto reported in December 2023 that another way to time the next Bitcoin cycle top is to use the Rainbow chart. This one has even more opponents than the Pi Cycle indicator.
However, our analysis shows that according to the rainbow chart, the current bull run target is $192,000 for BTC in February 2025.