While the price of BTC has topped $36,000, more and more people are wondering if this is the right time to buy coins. Note that no one knows what will happen to the price next with the price, and, after all, Bitcoin does not make the price rise and fall, we do. To understand the behaviour of the market, we suggest analyzing historical data.
Bitcoin reflects reality
Thanks to the transparency of the blockchain, anyone can track changes in market behaviour, funds received and withdrawn from exchanges, income and losses of BTC wallets, and a lot of other information that correlates with long-term price movements.
In this case, we are talking about big shifts that occur over the course of weeks and months, not days and hours.
Identifying major market shifts
There is a lot of data, and thanks to their presence, we can look at Bitcoin from different angles. Next, consider five indicators: Puell Multiple, MVRV Z-Score, HODL-waves and the amount of profitable market supply. This data reflects large and long-term changes in the interaction with Bitcoin, and all of them are very important.
Puell Multiple indicator
With the help of the Puell Multiple indicator, traders compare the price of mined BTC with the market value at a certain point in time. When this indicator grows, miners are prone to dumping in the market.
Note that changes in this indicator are usually directly affected by cryptocurrency prices. Thus, when the price of an asset decreases, the value of the daily volume in dollar terms also decreases, which leads to a drop in the indicators.
The indicator is used to identify periods in which Bitcoin is overvalued and undervalued “relative to its fair value”.
The MVRV Z-Score indicator reflects the difference between the current price of BTC and the price at which it was bought. As the valuation goes up, the profits of the owners go up. While as the sale progresses, the price of BTC falls.
HODL waves show the amount of BTC left without movement in a certain period of time, displayed as waves on the chart. Whenever long-term waves fall sharply, it means that the market has started to drain coins.
Different charts break waves differently. Here is an example of what a one-year HODL wave chart looks like:
Volume of profitable market supply
This indicator reflects the percentage of BTC, the value of which is now greater than when they were bought by their owners. So, as the milestone of 95% or higher is reached, this event is always followed by a coin dump.
Create your own plan
Given these indicators, you can develop many long-term investment plans that allow you to easily and with sufficient confidence determine the market tops and bottoms. But first, you need to determine your personal needs and develop a strategy that will work for you. There is no bad time to buy BTC. Anyway, as soon as we get to the top of the next market cycle, you will realize that you have not bought enough, no matter how much BTC you already have.
If you have time to study this data, you can get an advantage regardless of the direction of price movement.
Look beyond money
Of course, anyone can make a plan. The question is, does it fit with your goals and mindset? What other assets and income do you have? The maximum amount of investments, the presence of debts, etc.
Also, keep in mind that while you can predict big market moves, you can’t predict price. For an asset as volatile as BTC, you are unlikely to catch every top and bottom, every high and low. Thus, all you can do is make informed and informed decisions.