12 Cycle Top Tools & Exit Indicators - Christmas Special
Hello and Merry Christmas from your crypto Santa Claus.
In this Christmas special post, we're going to be going through some of my favourite cycle top tools and exit indicators, most of which are under-loved and under-appreciated.
Whilst I had previously mentioned that I'd be sharing 12 tools or indicators, it's Christmas and I have a few more than that up my sleeve...
As such, we really do have a lot to work through with this post, so I'm going to keep the exposition brief and crack on:
12 Cycle Top Tools & Exit Indicators (And More)
1. PI CYCLE
The Pi Cycle Top indicator has managed to capture the previous three cycle tops with scary precision. Real life voodoo.
The indicator uses the 111-day moving average and a 2x multiple of the price of the 350-day moving average; when the 111dMA crosses above the multiplier of the 350dMA, over the past three cycles we have found BTC/USD marks a cycle top. The reason for this being called the Pi Cycle Top is simply that 350/111 = 3.153 - not far off 3.142 (and apparently the closest mathematically one can get to Pi when dividing 350 by another whole number).
And whilst I am actually anticipating this does not catch the top this cycle (yes, this time may be different) due to the expected crossing being above $400k, we should expect to see the final phase of euphoria occur after Bitcoin accepts above the 350dMA x2, which is currently around $126k. I will therefore be looking more closely at other top signals after we move above that moving average, not before.
2. MVRV Z Score
Another on-chain metric that I have highlighted before as a particularly reliable tool for assessing periods of extreme froth is MVRV Z-Score.
MVRV Z-Score allows us to identify where Bitcoin might be overvalued or undervalued to an extreme degree, relative to fair value.
The indicator takes the Market Value of Bitcoin (price x circulating supply) and the Realised Value (the average price of the last time each Bitcoin was moved x circulating supply), and calculates a Z-Score between them, identifying extremities.
Historically, BTC/USD has formed its cycle high within a couple of weeks of a peak in this ratio. I am expecting this cycle to hit at least 4, above which again we can start looking more carefully at other exit indicators.
A more interesting version of this metric that is lesser known (and highlighted by bitcoindata21) is Whale MVRV (1000 to 10000 BTC), found here:
3. VOLATILITY-ADJUSTED POWER LAW INDEX & DECAY OSCILLATOR
The Volatility-Adjusted Power Law Index from Sina at 21st Capital builds on the Power Law concept, which I believe was made famous by Giovanni, measuring the deviation of Bitcoin's price from a fitted power law curve, adjusted by volatility to account for the shifting market structure over time. If you look at the chart below, you can see how periods in which this index pushes towards 100 and then turns and begins to fall have aligned with cycle tops. I am definitely going to be paying close attention with one foot out the door as this pushes 100 once again. You can find a live version of this here:
Similarly to the Volatility Adjusted Power Law, we have the Power Law Decay Channel Oscillator below, modelled by Sminston With. The peaks in this oscillator have pretty much nailed the tops of the previous cycles within a few days, but obviously there is no way to really determine in real time where exactly this will peak: rather, what we're looking for is the Decay Channel Oscillator to move above 90% and then start looking at our other exit signals, with 95% likely being very close to the point you want to be scaling out fast. As you can see, we're still sat below 60%, suggesting that the most absurd phase of this market cycle remains ahead of us:
4. MAYER MULTIPLE
The Mayer Multiple is simply the multiple over the 200-day moving average that price is trading at. Whilst the above chart is helpful, it is actually more helpful to see this normalized given the reduction in volatility over time. I found an adjusted Mayer Multiple indicator which depicts this here, and you can see this in the chart below. As we can see, we are nowhere near historical levels of overvaluation relative to the 200dMA when adjusted for volatility, in fact we're not even back at the March 2024 highs. I am looking for a push beyond that March 2024 high towards the 0.9 area:
5. NUPL
NUPL, or Net Unrealized Profit/Loss, uses the Market Value and Realized Value figures (as highlighted above in the MVRV Z Score section), subtracting Realized Value from Market Value. This is then divided by Market Cap, with the formula being: (Market Cap - Realized Cap) / Market Cap.
It's a great visual snapshot for market sentiment and the stage at which we might be in the market cycle. When we have historically approached or crossed 75%, a cycle top has not been far away...
To calculate it, one takes the sum of Coin Days Destroyed divided by the existing supply of Bitcoin and the time it has been in circulation. This is considered the 'transferred price'. The Transferred Price is multiplied by 21.
There has not been a single cycle where this Terminal Price has not been tested before the cycle peak, though obviously sample size is small.
The way I would use this is simply as an area around which we would want to make certain we're scaling out of positions - and right now it's sat at $180k. This doesn't mean we wait until $180k before exiting any long exposure, but rather when used in conjunction with all other exit indicators we can make the case that if those other tools are suggesting more upside and Terminal Price hasn't been tested, that may well be the magnet.
I would weigh more heavily the other on-chain metrics already discussed when looking for exit signals.
7. 4-YEAR MA MULTIPLE
The 4-Year MA Multiple is about as straightforward as it gets: you plot the 4-year moving average and calculate how far price has deviated from it. Historically, we have peaked above 4.5x that 4-year MA, but I would personally begin looking at all other exit indicators when this is approaching 4:
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8. 22-DAY RSI
Stole this one from C2M because it is exceptionally useful - we can, of course, use 2-week or monthly RSI too but 22-day is particularly clean for major swing points. In fact, every time 22-day RSI has peaked above 90, the cycle peak forms in the subsequent 22-day period (excluding that Nov 21 high).
What I am looking for is 22-day RSI above 90 for BTC, likely tagging that trendline, and then looking to exit positions over the subsequent 3-6 weeks:
9. COINBASE / PHANTOM / MOONSHOT APP RANK
Now, there is much supporting evidence relative to the life cycle of crypto that Coinbase App Store Rank hitting #1 on 'All Apps' is a clear signal that we're in stoppage time for the cycle. It makes sense: as the masses download crypto-related apps, we reach a saturation point of marginal buyers whilst unrealised PnL is at cycle highs, and when Coinbase is #1 for all apps across multiple countries that really is approaching maximum retail participation. This is also why the largest nominal gains happen in the shortest span of time right at the tail end of the cycle.
We now have Phantom and Moonshot as potential signals too, where Phantom hitting #1 on All Apps would be an unquestionable GTFO indicator, in my opinion. Usually, we tend to find Coinbase App Store Rank trends higher with peaks and troughs in the last few months of the cycle, and when it has hit #1 on All Apps we then tend to have less than 4 weeks before a major top. Again, we need to use this in confluence with other indicators.
We can track this in real time using AppFigures or you can follow a bot like Coinbase App Store Rank for daily updates. Bitcoindata21 also provides regular updates with sentiment analysis, so definitely bookmark this and follow along as the cycle progresses.
10. SEARCH TRENDS FOR QUALIFIED SEARCHES
I love Google Search Trends to determine market sentiment and get a snapshot of what the masses are interested in at any given moment, but most people use search trends in very basic ways with unqualified searched like 'Bitcoin' or 'Crypto'. You want to be more specific here to actually get some signal.
Here are some of my favourite qualified searches:
BINANCE LOGIN
CHEAPEST CRYPTO
CRYPTO APP
COINMARKETCAP
BUY CRYPTO
CRYPTO.COM
CRYPTO PRICES
11. TOP X MARKET CAPS
This is a way of assessing market cycle progress that I began monitoring in 2020 and it was super helpful in tracking the journey to the cycle top in mid-2021.
Quite simply, if our expectation is secular growth in nominal terms for crypto, we must anticipate market caps to grow across the board. That means that whatever the peak was for the top 10, top 25 or top 100 etc. last cycle will be eclipsed this cycle before the peak. I track the Top 10, Top 25, Top 50, Top 100, Top 300 and Top 500 market caps weekly and assess them relative to the requirements to enter those rankings at the November 2021 peak. You can view these Historical Snapshots on Coinmarketcap.
Now, if I have an expectation for the cycle, usually reverse engineered from what I might expect conservatively from Bitcoin, we can then estimate what to be looking for with the market cap required to enter such rankings this cycle towards the peak. To make this more plain, if I conservatively estimate BTC to hit $125k at a minimum this cycle, that's $2.5trn in market cap. I also conservatively expect Bitcoin Dominance to hit 50%. That means Total Market Cap should conservatively hit $5trn before the peak.
From this point, we can take the prior Total Market Cap all-time high of $3trn and calculate that our base case is a 1.67x multiplier for this cycle. Hence, the very minimum we should expect of the top x market cap rankings is a 1.67x multiplier on the prior cycle figures. Obviously, the further down the rankings you go, the likelier it is that this multiplier is higher.
To illustrate an example, let's look at the Top 100: in the previous cycle, to enter the Top 100 at the November 2021 peak, it required a market cap of ~$1.2bn. Today, to enter the top 100 on Coinmarketcap, you need a market cap of $1.25bn. We have marginally eclipsed the prior cycle peak and so Top 100 market caps are in price discovery. Our conservative expectation based on our views around Total Market Cap is that Top 100 should hit ~$2bn (a 1.67x multiplier) at the minimum before the cycle peak. Once we hit that area, undoubtedly we should begin looking for our exits.
12. 3-MONTH ANNUALIZED BASIS
3-Month Annualized Basis is just a really quick way to get a snapshot of froth in the derivatives market, though it is more useful for highlighting when it is prudent to derisk rather than fully exit a spot portfolio in anticipation of a cycle top. Nonetheless, historically when we have reached a 3-month annualized basis above 30%, things begin to get dicey. This makes sense given that the degree of froth in derivatives grows larger not smaller as you approach the cycle peak (or even mid-term tops), so, if we use these historical excesses as a benchmark, if we see similar figures tagged in the coming weeks and months that's certainly not where you want to be adding exposure. If we use this in conjunction with other tools, we can get a pretty clear view of major turning points. You can view 3-Month Annualized Basis on Velo.
BONUSES
13. OTHERS OI VS BTC OI
Much like the 3-month annualized basis, Dominance by Open Interest gives us a snapshot of froth and sentiment in the market more broadly, where periods in which Open Interest in OTHERS (altcoins ex. BTC and ETH) exceeds in nominal terms Open Interest in BTC regularly mark local tops. We saw it occur earlier this year and we saw it occur just this past week with the largest altcoin liquidation event in years. This is not super helpful for picking out cycle tops, and the general trend of OTHERS OI vs BTC OI will be upwards as we approach that peak, but it can show you where to expect flash crashes and liquidation events to reset some of this froth. You can find this chart at Coinalyze:
14. VC FUNDRAISING ROUNDS
Now, this is one of the more underappreciated metrics that I like to track, though it unquestionably lags the market cycle (for obvious reasons). Crypto fundraising rounds grow as the cycle progresses, but they peak after the cycle has already peaked as the latecomers keep piling into risk blissfully unaware that the music is no longer playing.
That being said, much like our expectations for market cap growth outlined above, in a secular bull trend we should anticipate the nominal dollars allocated to VCs to continue to grow too. I have very little doubt that we surpass the prior cycle highs for $ raised in a single month - and in fact if we look at that prior cycle we saw fundraising rounds break the 2018 high of $2bn in January 2021 before growing pretty much month on month all the way into April 2022, peaking at $7.12bn, although notably the November 2021 cycle peak saw the second-highest value at $6.88bn.
My expectations for this cycle are that we eclipse $7bn in monthly fundraising before the market cycle peaks, with the monthly fundraising peak coming some short while afterwards. Regardless, this is something I am now paying close attention to - and you can track it here:
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15. ALTCOIN SEASON INDEX ABOVE 85
Altcoin Season Index - as found here - is simply a measure of outperformance of the Top 50 coins relative to Bitcoin across any given period.
I like to use the Yearly Altcoin Season Index as my barometer, where a move above 75 means that 75% of the Top 50 altcoins outperformed Bitcoin over the preceding year. We are nowhere near that yet and have not revisited that level since the January 2022 top. That said, we are trending higher and have been for months - and I am looking for this index to hit 85 before the cycle peak. We peaked 88 in May 2021 and 94 in January 2022 but this is somewhat of a lagging indicator with no way to determine beforehand where the peak will be. Hence, we should simply view this as confluence for the rest of our exit indicators, where any move above 85 has been a historically prudent place to look at your other top signals:
As we can see, we're still very much mid-cycle. There's no way to know where precisely the Business Cycle Composite peaks (though the prior Trump cycle peak may be helpful), but this is a very good way to gauge where we might be relative to prior cycles.
My expectation is that we see the Business Cycle Composite above 52 before the cycle peaks, and we can then look for confluence with other indicators:
17. STABLECOIN DOMINANCE MOMENTUM DIVERGENCES
Stablecoin Dominance is simply the relative weighting of USDT and USDC as a % of Total Market Cap and I like to track 3-day momentum divergences in bull markets for signal as to underlying weakness in the market. Now, this won't help you precisely time major tops - in fact, if you had exited the market immediately on the formation of momentum divergence early in 2021 you would have missed a large part of the move into May 2021. What this should give you, however, is an early warning sign.
(Note that we also don't necessarily always form divergences before a local bottom in Stablecoin Dominance, with March 2024 simply v-reversing from that low.)
Nonetheless, if we see a momentum divergence form, I will be paying very close attention to my positions and other exit indicators. I have marked out what this might look like going into next year:
18. ALTCOIN DOMINANCE / (ETH + BTC DOMINANCE)
This is not so much an indicator as it is a way to view relative excess in the market as we approach cycle peaks. Historically, the way the cycle has worked is that we peak with altcoin dominance at cycle highs, for obvious reasons. Below, you can see altcoin dominance as a percentage of Bitcoin + Ethereum dominance, and I have marked out levels at which I am looking to scale out of positions this cycle, assuming this aligns with the other tools I have highlighted here today. Acceptance above that 20% region will usher in the real mania phase of the cycle, in my opinion, and subsequent to that we want to be vigilant:
19. BTC ON-CHAIN VOLUME (MONTHLY) (THE BLOCK)
This is simply a measure of economic throughput and we can see we're nowhere near the levels seen in November 2021; in fact, we're roughly around the January 2021 levels and I fully expect monthly on-chain volume to make new all-time highs this cycle at the peak. You can track it here:
20. NEW WEEKLY YOUTUBE VIEWS (THE BLOCK)
This one is completely self-explanatory but an underappreciated snapshot of sentiment. When we start making new highs above 7.5m weekly views (but likely above 10m), we know who the predominant force in the market is and therefore we know we need to have one foot in the exit door. You can track it here:
Right - I think that's plenty, so let's wrap this up...
The main point of this post was to provide you with a handful of clear tools and indicators to track keenly over the coming months, with no single tool being the Holy Grail, but rather using all of these in conjunction with one another to find confluence and maximize the gains you actually retain this cycle.
You're unlikely to time the exact top, but by using the material in this post you should have a much easier time in managing your positions as the music begins to fade.
I hope you've found some value in the read and this should serve as a good reference point to return to as the cycle progresses. Bookmark it, share it - all that shit.
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