For lovers of the technical analysis of the Cryptoverse, there are different methods and models with which price actions can be predicted. With this, we will try to determine whether the price of Bitcoin according to these models is a bargain.
It is worth noting that the models presented have a certain degree of precision. This keeps them up to date in the interest of the analysts.
Likewise, developers continue to monitor and analyze the crypto market to try to understand it and explain it with new models that will emerge over time.
Determine if the Bitcoin price is a bargain
This can be the “holy grail” of crypto verse. Because of this, it cannot be left to chance or horse problems.
At the moment we are interested in using special models to determine when the price of Bitcoin is a bargain.
In this way you have a technical basis and make an appropriate decision.
Of course, not all technical indicators need to match at the same time to take action. In practice, however, we know that the higher the signals of agreement, the greater the chances in our favor.
That is why we at CriptoTendencia have prepared this article with the intention of providing instructions on how to use three special models to predict the price of Bitcoin.
In the end, the interpretation and the corresponding action is always up to you, as are the profits and losses. Take into account that there is no 100% reliable model, strategy or indicator in the trade.
Difficulty Ribbon is a measuring device developed by the well-known Bitcoin analyst Willy Woo.
This method aims to explain the best time to buy Bitcoin based on the dynamics of mining.
In theory, when mining costs are unprofitable, weaker miners sell more of their coins to stay in business.
When this becomes critical, some miners withdraw, reducing hash performance and network difficulties (band compression).
Therefore, according to the Willy Woo model, the price of Bitcoin is a bargain if the difficulty band is compressed (it gets very thin). Or when it gets negative. That is, when the dark and strong D200 line crosses the weaker lines.
At the moment, it can be seen that the drop in Bitcoin prices in the first half of March led to a later reduction in the difficulties in mining.
This has resulted in slight compression of the belt. So if the model continues or a subsequent line crossing, it means that we are in an opportunity zone to accumulate bitcoins.
MVRV to determine if Bitcoin is undervalued or overvalued
MVRV (Market-Value-to-Realized-Value) is a new indicator that can be used to estimate the fair value of a crypto asset like Bitcoin.
This indicator aims to estimate the “fair value” of an asset using two metrics. Market value and realized value.
By combining both metrics, two historical thresholds are determined. These threshold values signal the overvaluation and undervaluation of the Bitcoin price.
That said, it serves to determine the price levels at which the owners bought Bitcoin.
For those who want to know when Bitcoin’s price is a bargain, the key condition regarding this model is given by:
If MVRV is <1, Holders can determine the best time to continue accumulation. The level of importance for this is if the MVRV is equal to or less than 1.
In this area, Bitcoin’s price has historically been a good time to accumulate.
At the time of writing, the MVRV ratio was 1.33, while in autumn March it reached 0.877, which some took advantage of.
Mayer’s Multiple (MM) is an indicator that is widely used by various retailers in Cryptoverse to help analyze the Bitcoin market.
It is a simple price list, but cleverly provides clear and precise information when used.
Mayer’s multiple is the current price of Bitcoin divided by the daily moving average of 200.
If the value of MM determines a value less than 1, we are below 200 MA. If a value greater than 1 is returned, we are over 200 MA.
At the time of writing, Mayer’s Multiple reported a value of 0.85, indicating that the price of Bitcoin is below the 200-day moving average.
According to his interpretation:
Therefore, we are in a bullish phase if its value is greater than 1 and in a bearish phase if it is less than 1.
According to the official Twitter account that monitors Bitcoin’s price for this model, Mayer’s Multiple was 1.45 in 77.50% of cases.
For this reason, any price where you get a lot less than this value can be a very good buying zone.
Models are metrics that we can use to visualize certain market conditions to get enough information to predict the behavior of an asset’s price.
As investors, we have to use models or indicators that adapt to our trading style to some extent.
As good as it may seem, we must never forget that it will eventually fail, regardless of the model or indicator chosen. This is because it is not a glass ball, but supports tools.
Learn, learn and learn, there is nothing better than that.