While the Mayer Multiple of Bitcoin shows low risk/reward circumstances at current prices, macroeconomic conditions continue to cast doubt on long-term optimism.
Bitcoin (BTC) is aiming to regain a major long-term moving average, but one statistic suggests that the time to purchase is before, not after.
Ecoinometrics, an on-chain monitoring resource, identified a classic entry for BTC/USD in a series of tweets on March 29.
Mayer Multiple comes dangerously close to pivoting
As the week begins, Bitcoin’s price surge has persisted, with the largest cryptocurrency reaching its highest level since 2022 overnight.
Some significant moving averages have also shifted in favour of bulls, and while the trend is not yet conclusive, excitement is growing that Bitcoin could potentially test November’s all-time highs as a result of this development.
Meanwhile, the 200-day moving average (DMA), which is currently at $48,300 and was recently breached in the last 24 hours, is next in line. The 200DMA is a critical component of the Mayer Multiple statistic, as it is used to determine profitable market entrance positions.
A Multiple score of less than 2.4 often indicates favourable long-term returns for investors. Bitcoin’s trend has reversed since it bottomed in January at roughly 0.76, and as of Tuesday — almost exactly at the 200-day moving average — Bitcoin has a Mayer Multiple score of 0.98.
“That is a good time to purchase,” Ecoinometrics said in comments, adding that even if a breakout from the 200DMA proves to be a bull trap, historically, losses in such instances have been “minimal.”
“Thus, despite the bleak macro backdrop, this is a buy,” a subsequent post stated.
“When it comes to asymmetric return techniques, you must be systematic.”
Derivatives are no longer speculative in nature.
These macroeconomic tensions, which include inflation and central banks’ efforts to combat it through monetary policy tightening, have remained a significant point of discussion this month.
Numerous analysts have warned that the prognosis for Bitcoin and risk assets in general might yet deteriorate further if interest rates increase and a “stagflationary” atmosphere develops.
Professional traders recognise that a protracted rise in BTC cannot potentially create a new paradigm, as derivatives market funding rates stay flat despite weekly advances of around 20% in BTC/USD.
“Excessive long-biased derivative market speculation is virtually non-existent at the moment,” analyst Dylan LeClair observed Monday in a Twitter conversation on the subject.
Displayed below are annualized perpetual future funding rates (24 hour MA).
Traders were paying ~100% annualized to go long $BTC early in 2021. A similar but less severe speculative market arose in the fall.
Today? Funding has been flat/negative for most all of 2022.
— Dylan LeClair 🟠 (@DylanLeClair_) March 28, 2022
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.