In our previous section, we explored Bitcoin's halving cycles. Within the approximately 4-year bull-bear cycles, what indicators can help us identify market tops and bottoms? This lesson introduces six key metrics, explaining their design principles, applications, and data sources to optimize your Bitcoin trading strategy.
👉 Master Bitcoin trading with these proven indicators
1. AHR999 Index (Nine God's DCA Indicator)
Created by Chinese crypto influencer "Nine God," this model combines two elements:
- Historical price regression
- 200-day dollar-cost averaging baseline
Interpretation:
- < 0.45: Strong buy signal
- 0.45-1.2: Ideal DCA range
1.2: Overvaluation zone
4: Potential market top
2. MVRV Ratio and MVRV-Z Score
MVRV (Market Value to Realized Value)
Formula:
MVRV = Market Cap / Realized CapThresholds:
- < 1: Undervalued (accumulate)
4: Overvalued (caution advised)
MVRV-Z Score
Measures standard deviations from mean value:
- Green zone: Buying opportunity
- Red zone: Market top
3. PlanB's Stock-to-Flow Model
Measures Bitcoin scarcity:
S2F = Stock / FlowPrice prediction formula:
0.4 * SF³Current S2F: ~56 (vs. gold's 72)
4. Active Address Count
Key patterns:
- Address peaks often precede price tops
- Sustained growth indicates network health
Historical peaks:
- 2017: 1.28M
- 2021: 1.36M
5. Miner Shutdown Price
Calculation factors:
- Hashrate
- Electricity cost
- Network difficulty
- Transaction fees
Trading signal: When price approaches shutdown threshold of dominant ASICs
6. Bitcoin Rainbow Chart
Color bands indicate:
- Blue/Purple: Extreme undervaluation
- Green/Yellow: Fair value
- Red: Bubble territory
Key Considerations
- These models are based on historical patterns
- Crypto markets evolve rapidly
- Always combine multiple indicators
- Consider macroeconomic factors
FAQ Section
Q: Which indicator has the highest accuracy historically?
A: MVRV-Z Score shows ~90% directional accuracy in backtests.
Q: How often should I check these indicators?
A: Weekly monitoring suffices for long-term investors; traders may check daily.
Q: Can these predict exact price tops/bottoms?
A: No indicator predicts perfectly - they identify probability zones.
Q: What's the biggest limitation of S2F model?
A: It ignores demand-side factors and market sentiment.
Q: How reliable is the shutdown price during halvings?
A: Volatility increases post-halving as miners adjust operations.
Q: Does active address count include exchange wallets?
A: No, it measures unique participating addresses only.
Remember: These tools complement but don't replace fundamental analysis. Always assess risk tolerance before making trading decisions.