Cryptocurrencies: A Method for Identifying Bull Market Tops

With the new ATH reached by the price of Bitcoin at $73,000, investors are asking the following question: what means do I have at my disposal to detect market tops? This question is central because those with the most tools can get the best performance in the market. Using the data available on the blockchain, let’s take a look at 6 indicators that represent a method of identifying peaks in a bull market.

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How to Identify the Top of a Bull Market?

During a bull market, crossing the ATH often marks the beginning of a feeling of euphoria among investors. This phenomenon is characterized by high transaction volumes and aggressive buying.

This period, when ATHs multiply relentlessly, is called “price discovery”: accurately illustrates the market boom. Note that a cryptocurrency market cycle (4 years) has never experienced more than 2 price discovery phases on the price of Bitcoin. These are unlikely to be relevant to identifying the top of the market:

Price discovery on Bitcoin (BTC) price from 2011 to 2024 – Glassnode

Historically, these periods of euphoria are very short and last several weeks, or even several months, the longest of them. Additionally, their amplitude decreases over cycles, with Bitcoin becoming less volatile.

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This tool comes with an MVRV indicator. An English abbreviation for “Market Value to Realized Value Ratio”, MVRV calculates the difference between market value and performance achieved (unsold positions) of investors.

During a bull market, this is indicated by a high MVRV ratio most of the market is holding big profits latent. Depending on each person’s risk threshold, different fixed thresholds (MVRV > 2.5 or MVRV > 4) can be used to identify market peaks:

Glassnode mvrv

MVRV on Bitcoin (BTC) price from 2011 to 2024 – Glassnode

In addition, this indicator is very relevant for discovering sales opportunities due to the accuracy of its data. It can also be used during a bear market, because an MVRV between 0.8 and 1.2 represents an interesting signal for those who want to expose themselves to the market with the best prices.

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The third indicator on our list is the Long Term Investor Distribution (LTH). To detect the top of a bull market, you need to ask yourself the following question: Are long-term (LTH) investors… (85% of item left)

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