Trying to catch the bitcoin peak is difficult. There are forecasts for when the market will peak, but nothing conclusively indicates where the rise will conclude. An analysis is typically done to capture the peak of the market, and tools are occasionally used to follow the top.
This isn’t to say that the tools will always be useful in catching the top. However, employing historical data and these methods can be beneficial in anticipating the peak of the market and determining a good time to sell certain digital assets and profit.
Five tools were proposed as contenders for predicting the market peak in the most recent issue of Glassnode’s weekly newsletter. Each of them makes use of years of on-chain and market data. The top is set at a different price for each tool. Let’s go over them one by one.
Mayer Multiple
The first instrument cited in the paper, which was released on Monday, is the Mayer Multiple. It is described as “a basic yet effective price-to-200-day moving average ratio” (200-day moving average). The Mayer Multiple employs statistical methods to demonstrate that a Mayer Multiple of 2.4 is an implausible extreme. In this case, the price has risen 2.4x in the long run.
Using this method, an upper band of $110,000 is achieved, with the possibility to trend higher or lower depending on how price changes on the 200 DMA.
Top Price Model
The Top Price Model is the second tool in the lineup. Willy Woo developed the tool as an epically fitted model that multiplies the all-time average price by a factor of 35. The all-time average price in this scenario is $6.1K. A bitcoin peak of $214K would be produced by multiplying the price by a factor of 35.
Woo’s model has proven to be a much less volatile tool to predict the market top than the Mayer Multiple. This is due to the fact that the Mayer Multiple is based on the 200 DMA, which moves far slower than the all-time average price.
Bitcoin MVRV Z-Score Metric
The standard deviations of the spot price from the realized price are measured using statistical normalization in this metric. According to the analysis, high market values indicate that investors continue to hold huge unrealized profits, indicating that the sell incentive has reached a maximum. This could aid in predicting when the market has reached a climax.
“On the other hand, bottoms can be reached when the market is substantially submerged, and investor capitulation is likely.” “The present market is roughly ‘halfway,’ having cooled off considerably following the top in April,” according to the research.
RHODL Ratio
The RHODL ratio is the fourth tool in the lineup that suggests a method for forecasting market tops. This analyzes the purchase and sell trends of older and newer investors in order to predict the top.
Because market bottoms occur when older, wiser investors acquire and hold a tremendous amount of supply, the inverse is valid for predicting the top. When older investors sell their shares, newer, speculative investors come in to buy up the supply.
According to the RHODL ratio, the market will peak when the number of newer (younger) coins in the market is high in comparison to older coins. According to the research, the RHODL ratio is currently stabilizing, as it did in 2013. This shows that there is a stable equilibrium between coins aged one week and one year.
Reserve Risk Metric
This is a tool that makes extensive use of on-chain data. It emphasizes the consequences of holders who refused to sell their shares during a bull market. As long as investors continue to keep their coins, the asset’s price will rise. As more holders refuse to sell, fewer “coin-days” will be destroyed, leading the Reserve Risk measure to fall.
However, prices will eventually reach a position where the majority of holders are eager to sell. Once this occurs, investors will recognize the opportunity cost, causing the Reserve Risk metric to trend higher, culminating at “blow-off peaks.”
It should be highlighted that, despite the bull market and enormous amounts of bitcoin amassed in the previous six months, Reserve Risk has remained low. “However, lately increased CDD is beginning to restart the upswing, albeit with plenty of gas left in the tank,” the research continues.
