Vague correctness far exceeds precise errors, here comes the guide to escaping the peak of the crypto market

Author: 1912212.eth, Foresight News

Only those who can buy are apprentices, while those who can sell are masters, succinctly capturing the mysteries of the market. Imagine this: when the asset you bought starts to bring in profits, and then continues to soar, your unrealized gains become substantial, filling you with joy as you believe it will reach your psychological price point, thinking that the upcoming frenzy is just around the corner.

However, the market suddenly halts. At this moment, you think it's just a consolidation phase. Soon after, another sharp decline occurs, and the market continues to slide, causing you to lose more than half of your profits.

Selling feels too bitter; you fear missing out on further gains. Not selling means holding on, but the harsh lessons of the market eventually arrive, and prices begin to drop below your cost. You think it has hit the bottom, only to see a further 30% drop. You choose to buy the dip again, only to face another 20% decline. At this point, you are severely trapped with no ammunition left. Just when you decide to cut your losses, it turns out to be the market's bottom range, and the market begins to slowly rise.

Failing to take profits leads to significant drawdowns, and even ending in losses, is an experience every newcomer to the market must go through, and even some veterans cannot escape the curse of market emotions.

This article will focus on interpreting the indicators for selling at the peak, hoping that readers can better grasp the timing for selling during major market movements after digesting and understanding the content.

Coinbase Tops the Free Apps Chart in the U.S.

As a compliant exchange in the U.S., Coinbase not only has a considerable influence on listing new coins but its app download popularity can also be used to gauge the overall market sentiment and heat.

During the last bull market cycle, after November 2020, Coinbase entered the top 100 of the Apple App Store's free apps, and by January 2021, it climbed to the top 30, even causing technical issues at one point.

Interestingly, nine months later, on October 28, 2021, Coinbase reached the top spot on the free apps chart, while BTC was hovering around $60,000, just ten days away from the peak of $69,000 set on November 8.

When users flock to download Coinbase to buy coins, the characteristics of the peak are already evident.

BTC Monthly Chart Struggles to Break 7 Consecutive Monthly Gains Record

From historical charts, we can see that in a complete bull market cycle, there is only one instance of BTC achieving consecutive monthly gains.

In the last cycle, from October 2020 to March 2021, BTC achieved a commendable six consecutive monthly gains. In this cycle, benefiting from the approval of spot ETFs, BTC has rarely achieved seven consecutive monthly gains.

After that, it began to consolidate. In this bull market, since the price is already above $60,000, achieving another seven consecutive monthly gains in the latter half of this bull market will be very difficult.

BTC Unrealized Net Profit / Loss

This indicator is mainly used to measure the profit/loss situation of Bitcoin players on-chain. We can see that the colors of the rows range from red, orange, light yellow, gray-white, to light blue from top to bottom. The bottom blue represents that most people are losing and cutting losses, while the top red indicates that most players are in profit.

When the line chart is in the light blue area, it often represents the bottom range of BTC prices, as those who are losing and cutting losses are continuously leaving the market to build a bottom. Conversely, when the line chart is in the yellow or red area, it often represents the top range of BTC prices, where a significant number of profit-takers will choose to take profits, leading to the peak of the cycle. This cycle repeats.

From the line chart, we can see that the current market is in the high point of the yellow area, with about 52% of Bitcoin players still in an unrealized net profit state.

In past cycles, the line chart has dipped significantly into the green area twice, indicating that most people were in a losing state. In this cycle, it has only occurred once, and whether history will repeat itself remains to be seen.

HODL Supply

This data chart is mainly used to observe the performance of Bitcoin HODL data. Here, we define short-term users as those holding coins for less than one year, while long-term users hold for more than one year.

At the top of a bull market, long-term holders often take profits and exit, so their proportion will decrease, while short-term holders tend to rush in to buy at price peaks, leading to a significantly high supply proportion.

If the above chart is not clear enough, you can refer to the next chart, where the peak of short-term holders often coincides with the stage's price top.

From this chart, we also observe an interesting phenomenon: as BTC prices continue to rise, players with insufficient capital may no longer afford to buy a whole BTC, leading to a situation where, although the supply of short-term holders may peak, it is far less than the peak holding amounts seen in the past two bull markets.

When the proportion of long-term holders decreases, it often indicates the market's top range (as shown in the next chart). They are the smart money in the market.

From the chart, we see that in the recent bull market, long-term holders began to sell in January this year, with the pace accelerating around February, and continuing to this day. As of now, their exit speed has begun to slow down.

Long-term Trend Indicator MVRV Z-Score

This indicator uses the total market cost as a base and mainly reflects the overall profit level of the market. The light red area represents MVRV, while the line chart represents Z-Score (highlighting the extreme situations between market value and realized value). When the orange line chart touches the light red area, it indicates the market's peak. If further segmented, a Z-Score above 6 also indicates the top range.

When the orange line chart is in the light blue area, it indicates that holders are generally in a losing state. The current indicator is 2, which is in the middle stage.

Bitcoin Contract Open Interest

In recent months, an interesting phenomenon has been observed: whenever the total open interest of Bitcoin contracts reaches a historical high, it often marks a temporary peak in BTC prices.

For example,

March 4: $29 billion, BTC price $68,499

March 13: $33.9 billion, BTC price $73,650

March 29: $38.8 billion, BTC price $70,780

June 7: $38 billion, BTC price $71,997;

Contract data represents the market's view on future trends. When the market is overwhelmingly optimistic about short-term trends and continuously increases leverage, it often leads to a correction to clear out positions and move forward lightly.

Summary

In addition to the above indicators, methods for judging market trends also include Ethereum gas fees, social media activity, and integer price points. It is both a science and an art. Investors need to comprehensively and rationally assess these indicators to better seize market opportunities.