Since its inception in 2010, the cryptocurrency market has been marked by high volatility, four parabolic market cycles, and an explosive rise in market capitalization. Bitcoin’s market cap now exceeds 1 trillion USD, while the total crypto market capitalization stands at around 2 trillion USD.

 

Bitcoin Price Predictive Models

Bitcoin’s price is highly volatile and exhibits strong cyclicality. A full Bitcoin market cycle spans approximately four years and consists of three phases, each defined by the Bitcoin Halving events:

• After a Bitcoin Halving, the market experiences aggressive upward movement lasting about one calendar year.

• Following this growth phase, the market undergoes a significant correction for roughly one calendar year.

• After reaching a bottom, the market consolidates for approximately two calendar years until the next Bitcoin Halving occurs.

The following predictive models for Bitcoin’s price are based on a combination of fundamental analysis, technical analysis, and on-chain data.

 

(1) The 'Bitcoin Stock-to-Flow' Model

■ Category: Fundamental Analysis

■ Interpretation: Identifies the ‘fair’ price of Bitcoin, for each market cycle

The 'Stock to Flow' (S2F) model is a popular approach based on the idea that a reduced supply of an asset leads to a long-term price increase. According to the current S2F model, Bitcoin is forecasted to reach $100,000 by the next Bitcoin halving.

Chart: Bitcoin S2F Model

 

(2) The 'Bitcoin Rainbow' Chart

■ Category: Technical Analysis (Log Chart)

■ Interpretation: Identifies Market Tops/Bottoms

The Rainbow Chart is a logarithmic chart designed to identify market tops and bottoms. Notably, the 2017 peak occurred at a lower level than the 2013 peak. It remains to be seen whether the peak of the current uptrend will form at a lower level than the 2017 peak. It’s important to note that increased institutional investor participation tends to reduce Bitcoin’s price volatility.

Chart: Bitcoin Rainbow Chart

□ Bitcoin Rainbow Chart:

Link:  https://www.blockchaincenter.net/bitcoin-rainbow-chart/

□ Another logarithm chart for Bitcoin:

Link:  https://www.lookintobitcoin.com/charts/bitcoin-logarithmic-growth-curve/

 

(3) The 'Puell Multiple' Model

■ Category: Fundamental Analysis (on-chain)

■ Interpretation: Identifies Market Tops/Bottoms, the lower the better

This model focuses on the supply side of the Bitcoin economy, emphasizing the crucial role of Bitcoin miners. Miners are rewarded with newly minted Bitcoins as an incentive to maintain network security.

The model analyzes market cycles through the lens of Bitcoin mining revenue. Since miners need to sell some of their Bitcoin rewards to cover fixed costs like mining equipment, the model compares the daily issuance value of new Bitcoins to the 365-day moving average issuance. This ratio helps illustrate supply dynamics affecting the market.

Chart: The Puell Multiple on Bitcoin

□ Watch it live here:

Link:  https://decentrader.com/charts/the-puell-multiple/

 

 

(4) The 'Mayer Multiple' Model

■ Category: Technical Analysis

■ Interpretation: Identifies Market Tops/Bottoms, the lower the better

This model focuses on the supply side of the Bitcoin economy, highlighting the vital role of Bitcoin miners. Miners receive newly minted Bitcoins as a reward, incentivizing them to secure the network.

The model examines market cycles from the perspective of mining revenue. Since miners must sell some of their Bitcoin rewards to cover fixed costs such as mining equipment, the model compares the daily issuance value of new Bitcoins to the 365-day moving average issuance. This ratio helps illustrate how supply dynamics impact the market.

Chart: The Mayer Multiple on Bitcoin

□ Watch it live here:

Link:  https://mayermultiple.info/

 

(5) Revealing the Action of Large Investors

■ Category: Fundamental Analysis (on-chain)

■ Interpretation: Large investors benefit from superior information and often act ahead of the market.

Unlike traditional markets, the cryptocurrency market offers real transaction transparency. Everyone can see exactly what others are doing—especially when it comes to large wallets, commonly known as crypto whales. Here are some useful tools to help track and understand the actions of these major players:

1- Bitcoin Rich List

Spotting changes in large Bitcoin wallets, on a daily basis.

Link:  https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

2- Bitcoin WallStreet Treasuries

A list of Wall Street companies investing in Bitcoin. Today, Wall Street investments in Bitcoin amount to 86.5 billion US dollars (acquisition cost of 62 billion dollars).

Link:  https://bitcointreasuries.org/

3- Bitcoin available in Exchanges

The less Bitcoin is held by exchanges the better. When Bitcoin rises sharply in Exchanges it is a sign that the big players are getting ready to sell.

Link:  https://cryptotips.eu/en/blog/overview-total-amount-of-bitcoin-on-exchanges/

 

(6) Other Prediction Models & Additional Data

Here are some more BTC models (on-chain analysis) worth mentioning:

Name: Bitcoin Reserve Risk

Usage: The smaller the better

It measures the confidence of long-term bitcoin owners in relation to its price.

Link:  https://www.lookintobitcoin.com/charts/reserve-risk/

Name: Unrealized Profit / Loss

Usage: The smaller the better

This index measures unrealized profits—profits that have been made but not yet realized through selling. The higher the level of unrealized profits, the greater the likelihood that the market is overbought.

Link:  https://www.lookintobitcoin.com/charts/relative-unrealized-profit--loss/

Name: RHODL Ratio

Usage: The smaller the better

The index has accurately identified previous Bitcoin macrocycle tops.

Link:  https://www.lookintobitcoin.com/charts/rhodl-ratio/

Name: MRMV Ratio

Usage: The smaller the better

The MRMV Index uses blockchain analysis to identify periods when Bitcoin is overvalued or oversold relative to its “fair” value.

Link:  http://charts.woobull.com/bitcoin-mvrv-ratio/

There is also the MRMV Z-score

Link:  https://www.lookintobitcoin.com/charts/mvrv-zscore/

Name: Funding Rates

Usage: The smaller the better

This indicator measures the cost of maintaining long or short positions in the market. When the funding rates for long positions become very expensive, it signals that the market is overbought and a correction is likely imminent.

Link:  https://defirate.com/funding/

Name: Fear & Greed Index

Usage: The smaller the better

The Fear & Greed Index measures the emotions of retail investors on a scale from 0 to 100. A reading above 90 signals an overbought market, while a reading below 20 indicates an oversold market. Essentially, it’s best to take a contrarian approach when interpreting the Fear & Greed Index.

Link:  https://alternative.me/crypto/fear-and-greed-index/

 

 

The 4-year cycle of Bitcoin –Explaining Crypto Markets Cyclicality

 

The cryptocurrency market is among the most cyclical markets globally. This cyclicality is mainly driven by the following factors:

(1) Bitcoin Halving: Occurring every four years, each halving reduces Bitcoin’s inflation rate by half. Traditionally, every Bitcoin halving signals the start of a new bull market for the crypto industry.

(2) Market Cycles: Each bull market triggers an explosive increase in crypto market values, followed by a necessary correction lasting roughly one calendar year. This decline is then followed by about two years of price accumulation before the next bull market begins.

(3) Technological Advances: Continuous, impressive technological innovations drive the uptrend but also fuel overly optimistic market forecasts, which can result in inflated valuations.

(4) Market Bubbles: Each bull market witnesses unprecedented bubbles. For example, Dogecoin’s market cap recently surpassed an astronomical $50 billion.

It is highly likely that Dogecoin will lose more than 95% of its value in the next bear market—unless, of course, it becomes the official currency of Mars, implying billionaire Elon Musk’s involvement in Dogecoin’s unprecedented and arguably irrational rise.

 

□  Predicting the Market Tops/Bottoms of Bitcoin (BTC)

George Protonotarios, Economic Analyst

ExpertSignal.com (c) 19th April 2021

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