Key Takeaways:
- A crypto analyst uses Mayer Multiple to find similarities between past Bitcoin cycles and the current one.
- What is Mayer Multiple and how does it relate to the Bitcoin chart?
- The digital asset is ready to close the sell-off phase.
YEREVAN (CoinChapter.com) – An anonymous crypto analyst with the Twitter-handle CryptoHamster, posted a series of graphs that show the utility of a technical indicator named the Mayer Multiple in determining the bullish/bearish phases for Bitcoin.
The graphs are based on historical data and indicate that the alpha crypto is on a new recovery period threshold.
Mayer Multiple (MM) is an indicator that is relevant to all the analyst’s comparisons.
Mayer Multiple and Bitcoin
Cryptocurrency investor Trace Mayer created MM to make better sense of economic bubbles. He further utilized the indicator to determine the best entry points into the market and the potential exit points. In other words, the MM is a gauge of when to buy and when to sell.
To calculate the Mayer Multiple, one has to divide the current market price of an asset by its 200-day moving average (200-DMA). In hindsight, the 200-DMA is the mean of 200 days-worth of prices. Thus, the closer the current price is to the 200-DMA, the closer the MM is to 1.
Mr. Mayer examined historical charts in his study and warned investors that they shouldn’t use MM to predict future price action. However, his studies determined that whenever the MM was between 0 and 1, the price would bottom-up and prepare to ascend for the long term.
Coincidentally, when the MM was higher than 2.4, the price action turned bearish as Bitcoin charted through “overbought” territory. Thus, the MM at 2.4 will yield the highest returns. After that threshold, the price action is likely to go bearish.
In CryptoHamster’s charts, the similarities between 2014, 2018, 2019, and 2021 charts lie in the MM value.
In all the charts above, the MM started to move down when it was close to 2.4. Moreover, whenever the price action broke below the 50-day moving average (50-DMA), the MM slid under the 200-DMA. Thus, in all the cases mentioned, it indicated a long-term bearish market.
Also read: Bitcoin holds above $40K as China FUD prompts regional investors to ‘long’ crypto.
BTC daily chart
The latest occurrence of the overbought MM phenomenon happened on April 14, 2021. At the time, the BTC/USD pair traded at an all-time high of $64,895. After four days, the price fell under the 50-DMA. As seen on the chart below, the MM (blue graph at the bottom) started to decline earlier, at 2.73. It hasn’t fully recovered since.
However, according to the observations on the prior price peaks, a possible recovery wave is underway.
The previous cycles took the MM 5-7 months on average to bottom-up, recover fully, and cross back above the 200-DMA. Then the indicator took several more months to consolidate close to the wave. Therefore, the next power rally would happen no sooner than after six months of the mentioned consolidation.
The price action proved the utility of the indicator. In the past cycle, after peaking at $13,880 (June 26, 2019), the price followed the bearish path and started to decline (MM – 2.49). The MM then crashed below the 200-DMA on August 22 and initiated a bearish 5-month phase. A 9-month consolidation followed. Then BTC took off on a bullish tear.
All the factors mentioned above lead to the conclusion that Bitcoin is ready to close the sell-off phase. It bottomed up on July 20 at $29,296 (MM-0.69). If past is any indication, the digital asset should enter consolidation for a few more months before rallying to a new all-time high.
Also read: The US Debt Ceiling Fiasco: What does it mean for crypto markets?
