Is the bottom in for Bitcoin? Let's examine 5 crucial indicators to determine if the bear market is waving goodbye or plotting its next move!
200 Week Moving Average
As shown above, Bitcoin typically trades at just below the 200-week MA at its bear market low points. At its current price of almost $28,000, Bitcoin has returned above its 200-week MA after spending 7 months below it — the longest time below its 200-week MA to date.
Now that BTC has resumed trading above the 200-week MA, this indicates the bottom is now behind us and the market is moving into bullish territory.
The chart takes the form of a basic logarithmic regression that shows the evolution of Bitcoin’s price over time. On top of the chart, nine different colored bands are overlapped to indicate periods where Bitcoin is expensive, cheap or just right compared to its predicted price.
Historically, the blue “fire sale” band has held up as a solid indicator of the market bottom and Bitcoin has rarely traded inside this band for long. The last two times this occurred were during the COVID-19-induced flash crash back in March 2020 and most recently in December 2022, when Bitcoin fell below $18,000.
Given that Bitcoin has now recovered from the blue band and is now hovering in the green “BUY!” zone, this indicates the bottom was reached in December 2022.
Hash Ribbons Indicator
If the 30-day moving average drops below the 60-day moving average, it indicates miner capitulation. Whereas a reversal in this trend shows miners are recovering and the hash rate is growing.
Historically, the 30 and 60-day hash rate moving averages have collapsed near the Bitcoin bottom.
According to the indicator’s inventor, Charles Edwards, miner capitulation is "possibly the most powerful Bitcoin buy signal ever".
On the above chart, red lines indicate periods of miner capitulation.
Given that the hash rate has now recovered following a drop in both the 30 and 60-day hash rate MAs, this is an indicator that miners are no longer capitulating — a bullish signal. The hash rate 30-day MA is now higher than the 60-day MA, which is also a bullish signal.
This is a simple indicator that measures the magnitude of price changes in an asset to determine whether it is overbought or oversold. An RSI chart is a simple oscillator graph that shows a value reading between 0 and 100.
The lower the number is, the more oversold the asset is. On the flip side, a higher score indicates the asset is overbought.
Here's how RSI values are usually interpreted for Bitcoin:
- RSI => 70: BTC is potentially overbought and a pullback may occur.
- RSI <= 30: BTC is potentially oversold and recovery may occur.
- RSI 30-70: Neutral territory, BTC is neither oversold nor overbought.
Based on this, Bitcoin is now in neutral territory and the worst is now behind us.
The CBBI Index
The chart is designed to show which stage of the cryptocurrency market cycle we are currently in. It was trained on data from the blow-off tops seen in 2013 and 2017, and as such, is particularly good at recognizing times when Bitcoin is approaching peak exuberance.
Unlike the other indicators on this list, the CBBI index aggregates multiple other indicators into a single CBBI score that ranges from 0 to 100.
The indicators included are as follows:
- Pi Cycle Top Indicator: Predicts market tops using moving averages.
- RUPL/NUPL Chart: Gauges investor sentiment via unrealized profit/loss ratios.
- RHODL Ratio: Measures HODLer behavior for market cycle predictions.
- Puell Multiple: Analyses miner behavior to predict selling pressure.
- 2-Year Moving Average: Tracks Bitcoin's long-term price trend.
- Bitcoin Trolololo Trend Line: Long-term logarithmic growth curve for Bitcoin.
- MVRV Z-Score: Indicates market tops/bottoms based on realized/unrealized value.
- Reserve Risk: Assesses risk/reward balance using HODLer behavior and price.
- Woobull Top Cap vs CVDD: Compares valuation models to predict tops.
The higher the number, the higher the chance that Bitcoin is at its top this cycle. Conversely, if the number is extremely low, this can hint that the bottom is in.
The CBBI score can reach upwards of 80 near the top of a bull market or as low as under 10 close to the bottom.
At the time of writing, it’s sitting at a comfortable 25 — a major recovery from 2, seen in December 2022. This indicates the worst of the bear market is now behind us.
Writer’s Disclaimer: This article is based on my limited knowledge and experience. It has been written for educational purposes. It should not be construed as advice in any shape or form. Please do your own research.