Every time the Bitcoin Mayer Multiple crossed 2.4, it extended before hitting a macro top and then dropping afterwards to 1.5
Bitcoin (BTC) broke above $40,000 and tested resistance near $40,500 before selling pressure pushed it to lows of $36,618. Prices have since recovered, with bulls pushing to higher levels at $39,800. Although the price is likely to rise further, the short term outlook suggests a potential dip amid increased profit-taking. Also suggesting a bearish flip is a key price bands indicator called the Mayer Multiple.
According to one pseudonymous Bitcoin analyst, the Mayer Multiple suggests BTC price might continue to surge short term before topping out in early February.
“This is the fifth time that Bitcoin has broken 2.4MM. The previous times it continued to trend directly towards a macro top. Possible macro top around this date: February 8…” the analyst tweeted.
Bitcoin chart with the Mayer Multiple. Source: ParaboNICK
It should be noted that the Mayer Multiple analyses Bitcoin’s price from a historical context. It takes into account the gap between current prices and the asset’s 200-day moving average. The multiples rise from 0—15, with a typical entry point for those seeking to invest when the reading is below 2.4.
Whenever the MM surges past 2.4, it typically drops to around 1.5. During the last bull cycle, the gap between the BTC price and the multiple rose to over 3.5 before plummeting in 2018 to around 0.5.
Currently, Bitcoin has a Mayer Multiple of 2.72 and a 200-MA of $14,389. As per the metric’s simulations, prices are likely to surge short term. However, the top looks imminent.
According to the analyst:
“If that happens maybe then we have months of a nasty pullback (mini bear market) and then another macro top around Sep-Dec 2021”.
BTC/USD daily chart
BTC/USD currently faces resistance at the 461.8% Fibonacci retracement level of the swing to March 2020 lows. The price barrier is at around $40,593, the scene of yesterday’s selling pressure that curtailed the upward action at highs of $40,402.
BTC/USD daily chart. Source: TradingView
The 400% Fibonacci retracement level ($35,679) and 361.8% Fib at $32,642 provide initial support zone if prices break below $38,000. If the Mayer Multiple begins to flip negative and falls below 2.4, it is likely the short term decline could extend to the resistance-turned-support level at $27,738.
A mini bear market could then bring into play the 50-SMA (23,189) and the 200-SMA (14, 389), which might offer long term demand reload zones.
On the upside, Bitcoin is literally in uncharted territory. With the price in discovery mode, a daily close above $40,000 on increased buying volume could see bulls target $46,000.