With Bitcoin’s price crossing $41000 and hitting a new ATH, there are several stories on the internet examining the similarity between the current and the bull runs in 2013 and 2017, which may just be a desperate effort to predict the price trend. However, there are a few metrics that support this comparison.
One of the popular metrics is Bitcoin’s Mayer Multiple. The value of Bitcoin’s Mayer Multiple is 2.87 at press time and it is currently 2% lower than all of Bitcoin history. This value of the multiple puts it in the 2013 and 2017 bull run’s zone and as institutional investors are entering the market and generating higher demand, the burning question is whether this high multiple will be sustained?
Source: Ecoinometrics
The current value of the Mayer Multiple suggests there may be a correction in Bitcoin’s price and that is bearish, however, that favors the opposite sentiment. Based on this metric, the price rally is likely to continue till February 2021 and then top out. The Mayer Multiple has emerged as a reliable indicator in 2013 and 2017, this makes it critical to watch its value when the price is rallying.
If there is a macro top, there is a possibility that most retail traders may time their exit and book profits. Besides the Mayer Multiple, another key chart for predicting the direction of the price trend is the Bitcoin risk-adjusted returns that show that the value of the Sharpe ratio for Bitcoin is back in the 2017 level. This is bullish since the returns have been more consistently increasing in the past 3 quarters, and despite many traders wishing for a dip, there hasn’t been one. Instead, crypto Twitter analysts are of the opinion that Bitcoin’s price may never hit $20000 ever again.
Bitcoin risk adjusted returns || Source: Woobull Charts
The above chart captures the 2017 bull run, the winter, and the ongoing price rally. Bitcoin is the asset with the highest risk-adjusted returns, however, it is now at the bull/bear threshold and the direction of the price trend could be a deciding factor for Bitcoin’s price. The value of the Sharpe Ratio signals bullish sentiment, unlike the Mayer Multiple. Further price discovery above $40000 will predict the accuracy of the Mayer Multiple/ Risk-adjusted returns
