Confluence is Key: Bitcoin Status Call

This is a historically great time to buy Bitcoin according to a confluence of indicators that we use to assess market conditions. While we do have strong conviction that there is lots of profit left on the table for this market cycle, we also do not anticipate this cycle to have much longer before another multi-year bear market returns.

Our estimate is that there is around 6 months of bullish action left to capitalize on before hedging in stable yield plays during the downturn. Given the current time horizon, we are looking at targets of a $150,000 BTC and $10,000 ETH. It is entirely possible for the peak of the cycle to be higher on both assets but we prefer a more conservative outlook.

When assessing the market for which direction is ahead of us, it is vital to not rely on one or two signals to shift your bias. Rather, you need a multitude of macro indicators to back up your thesis. It is often the case that not every signal will be valid so looking through a larger perspective helps to have more clarity in a time of uncertainty.

Below we have shared our thoughts on a variety of macro and on chain indicators that lead us to believe there is more juice left in this run.

Charts & Figures

The Bitcoin Investor Tool: 2-Year MA Multiplier

The 2 Year Moving Average has been used as an incredibly powerful indication of most profitable times to buy BTC as reflected in the returns whenever price drops below the green line. Inversely, the red line is the 2 Year MA x 5 and shows that price action above that line is the most profitable time to sell. As of now, the sell signal on this indicator is far from being reached and presents opportunities to capitalize in the mean time.

The Golden Ratio Multiplier

The 350 Day Moving Average is also a powerful tool to indicate the best times to buy BTC. The Golden Ratio chart shows multiples of this MA with the Fibonacci Sequence that has been reliable to predict resistance levels for BTC and the tops of past cycles. As more money moves into the market, returns diminish over time and have lead to one less multiplier as the top of each cycle. This leads us to believe the 3x Upper Bull High line will be the top signal at the peak which is currently over the 100K level.

The Puell Multiple

In the Puell Multiple, we take a look at price action from the miner’s perspective and have found some powerful correlations to buy and sell signals. It is calculated by dividing Daily Coin Issuance from miners by the 365 day MA of Daily Coin Issuance. The resulting multiple has indicated historically great buying and profit taking opportunities. In this current cycle, we have seen 2 fantastic buying opportunities but have not reached peak profit taking as of yet. Our current price action signifies prime accumulation prior to the final parabola.

The MVRV Z-Score

The MVRV Z-Score takes into account that short term market sentiment can skew the true market value at the time. The Realized Cap line reflects long term holders and when they move their Bitcoin rather than solely looking at the short term holders. The Z-score is a standard deviation that pulls out extremes in Market Value and Realized value. It has accurately picked cycle highs each time in the past, leading us to believe that we still have yet to see the peak this time around. Also note that it presented 2 buying opportunities during this macro trend.

Stock-to-Flow Model

This is one of the most often referenced indicators when looking at the macro trend for Bitcoin cycles. In the past it has been used to model Gold, Platinum, and other scare assets. Bitcoin is of course one of the most scarce assets in the world and has correlated strongly with this model. The color coordination revolves around when the Bitcoin Halving occurs where the block reward for mining new Bitcoin is cut in half and scarcity increases. Purple indicates the Halving event as the bottom for a new cycle. The switch to Lime Green has indicated the peak. As the cycles take longer to occur over time, peaks will slowly move lower along the Halving gradient to blue tint. As of now, the peak is not in for this macro signal either.

Bitcoin NVT Price

This indicator created by researcher Willy Woo, looks at on-chain volume versus the market cap of BTC. NVT Price values the Bitcoin network utilizing the investor volume as seen on-chain. NVT Ratio is the ratio of on-chain volume to its market cap, similar to a PE Ratio. NVT Price is calculated by multiplying on-chain volume by the 2 year median value of NVT Ratio, that network valuation is then adjusted to price by dividing by the coin supply. During times where BTC price falls below the NVT price, it has indicated a buying opportunity with only one false signal thus far.

Weekly RSI & Stochastic RSI

The Stochastic and Weekly RSI can be combined to assess momentum in the current market. We like to use the Weekly time frame as it gives more alpha on the macro trend. BTC had a mid cycle peak with the weekly RSI reaching a sell signal of 95 and printing a bearish divergence after that. This divergence played out to a multi month trend reversal which appears to have lost momentum. The Stochastic RSI indicates momentum to the up or downside and currently has been over extended to the downside during this correction period. With BTC bouncing off a bull cycle support level of 45 in the RSI and a Stochastic that is ready for upside, recovery is imminent.

The Contrarian Perspective

Despite our bullish bias at the moment, there needs to be some indication of further downside action in the market. So far, the bearish divergence on the weekly time frame has still been viable and has not been invalidated yet. If bitcoin closes this month at roughly $29,600, it will have printed a gravestone doji on the 6 month chart. This would be a major indicator of the trend reversal confirmation.

Pi Cycle Top Indicator

Utilizing the 111 Day Moving Average, the Pi Cycle Top Indicator has been within 3 days of predicting the top of past cycles. It also has one false signal in 2013 where it the run continued for one last push. In hindsight, it was a powerful took in determining the final rally in 2014 and 2018 but can be seen somewhat as a lagging indicator in those cases.

The Bottom Line:

As it stands at the moment, we have a very bullish outlook on the price of Bitcoin and the Crypto market as a whole. From what we have seen in our various tools, this cycle seems to be resembling the 2013 price action more closely than 2017. This does not mean it will play out exactly the same way but the similarities can not be denied thus far. For those with a long enough time horizon, this was one heck of a buying opportunity.