This Bitcoin price top indicator can actually be a good bottom indicator as well

Since reaching its all-time high of nearly $69,000 in November 2021, Bitcoin has been in decline ever since.

As we recently touched, the price of Bitcoin has been on the slide for the better part of a year, but the bottom appears to be in sight. Although most indicators suggest that Bitcoin is now nearing the bottom of the latest bear market, it is still unclear how low it might go or when it will happen.

But by reusing the popular Pi Cycle Top indicator, we can now get closer to an answer.

How it works

Created by Philip Swift, the founder of LookIntoBitcoin, the Pi Cycle Top indicator uses a combination of the 111-day simple moving average (111SMA) and 2x multiple of Bitcoin’s 350-day simple moving average (2x 350SMA) to predict the top of Bitcoin’s market cycles.

Historically, the 2x 350SMA has proven to be an accurate predictor of Bitcoin’s top, having predicted the height and timing of the last 3 bull markets.

Although the Pi Cycle Top Indicator is primarily used to indicate Bitcoin’s top, it also shows impressive predictive power for the bottom – with the 111SMA overlapping the bottoms of the 2012, 2015 and 2019 bear markets.

Backtested on historical data, the 111SMA has been shown to predict the depth and timing of the Bitcoin bottom within 5 months.

What it means for the Bitcoin price

Bitcoin is widely known to have a roughly four-year cycle centered around the halving event – ​​with Bitcoin tending to bottom around 380-550 days before the halving date, and peak around 360 to 520 days after the halving.

But these numbers are far from precise enough to really benefit from.

According to the 111SMA, the Bitcoin price now appears to be between 1-5 months away from the bottom, which means that a further drop can be expected at some point before March 2023. Given that the 111SMA has so far never bottomed before Bitcoin, we can assume that the bottom has not yet been reached either.

If history repeats itself, Bitcoin can be expected to drop as much as 86% from its previous all-time high to potentially fall below $10,000 briefly. Should this be the case, a further drop of 49% could be on the horizon.

This is further confirmed by Bitcoin’s sliding trading volume – which has fallen by more than a third in the last three months. While Google’s search interest has fallen by 50% in the same period.

The relationship between trading volume and Bitcoin’s price is well documentedwith a clear positive correlation found between volume and price.

This is consistent with its historical price action, which saw Bitcoin experience a sharp drop over a period of ~1 month to bottom out, before beginning its long-term recovery.

However, with the macroeconomic environment still in a bad way with the DXY continuing to rally and most countries seeing a slowdown in GDP, risk assets like Bitcoin are unlikely to experience a dramatic comeback anytime soon.