Bitcoin Price May Be Nearing Bottom if these Drilling Analogy Metrics Are Correct
If there’s one thing practically every cryptocurrency holder or speculator has attempted to do, it's predict or identify the bottom of a bear market for the bitcoin price.
Given that the delta between a trough and a subsequent all-time price high can be in the range of tens to hundreds of percentage points for popular cryptocurrencies, the potential benefits of building an accurate model to identify peaks and troughs are enormous.
Until recently, most models were only able to identify either the top or the bottom of a market with reasonable accuracy. But Glassnode, a prominent on-chain analytics and research firm, recently unveiled a novel model to accurately identify both — with a 100% hit rate against backtested data.
The new model, known simply as the drilling method, leverages multiple new and existing data points to help accurately identify market extremes — providing an additional source of data for traders and speculators.
This is how it works.
Created by the prominent investor Trace Mayer, the Mayer Multiple is defined as the multiple of Bitcoin's price over its 200-day moving average (MA) — such that a current price of $50,000 and a 200-day MA of $25,000 would yield a Mayer Multiple of 2.
The Mayer Multiple has been used to indicate whether Bitcoin is in a bubble or not. By backtesting data, Trace Mayer found that a Mayer Multiple of 2.4 could accurately predict the top of a bull market, whereas a number less than 1 indicates a bear market.
As such, many traders believe that a Mayer Multiple of 2.4+ indicates the Bitcoin price is overvalued or that buyer exhaustion is near.
Going one step further, Glassnode created a construction that tests whether the Mayer Multiple is above 2.4, in addition to several other
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