Bitcoin bubble graphic

bitcoin bubble graphic

started to plunge in early 2018. In other words: when its price significantly exceeds its intrinsic value or points of seller exhaustion. Meanwhile, the massive global real-estate market is valued at 217 trillion, which is still less than the largest single type of market: debt. This has historically been characterized as the "euphoria" phase of a bubble, based on economist Hyman Minsky's financial instability hypothesis. As HowMuch puts it, the cryptocurrency market is certainly one of the fastest-growing and most exciting assets in the world. That said, some traders believe identifying speculative bubbles and moments of bearish exhaustion can be made possible through the use of a fairly new metric known as the Mayer Multiple. For example, if the price is significantly higher than a long-term moving average, its often a sign that the underlying asset has become overvalued or what is commonly referred to as overbought.

By conducting simulations based on historical data, Mayer deduced that the best long-term results were gathered by accumulating bitcoin when the Mayer Multiple was below.4. However, that could turn out to be a bear trap, as a sharp drop from extreme overbought conditions to levels below 200-day MA is usually accompanied by short-term overbought conditions. A very high number represents extreme overbought conditions or bubble. Network data and activity follow the price, things bottom out, the ecosystem re-achieves an equilibrium and then it makes another run rinse and repeat.

The Mayer Multiple essentially quantifies the gap between the price and 200-day MA to identify historical values at which point bitcoin enters a speculative bubble. But heres some solace: It acts pretty predictably. The opposite is the case when the price falls excessively below the moving average. Minsky's theory became well-known during the global financial crisis as it identified five stages of a bubble: displacement, boom, euphoria, profit-taking and panic. But for all the hype, the entire crypto market is worth only a tiny fraction of the gold market, which is itself only worth about 10 of the entire worlds stock markets. And finally, an above-1 Mayer Multiple could be considered a sign of a bull market. And not just for the red candle addled price, but for the network, its transaction counts, and general interest as well. On the other hand, bitcoins market favors the bulls when the Mayer Multiple is above 1 but theres an exception. Its just a correction.