How will the market move? Is it bullish or bearish? Should you rush to buy the dip now, or wait for a further decline?
The monthly Bitcoin price charts for August and September show a downward trend, with upcoming events such as the September CPI and interest rate cut expectations, indicating the market may experience significant volatility. So, is now the right time to buy the dip? Let’s explore the Bitcoin indicators for answers.

What Are Bitcoin Indicators?

Bitcoin indicators refer to a series of data and tools used to analyze Bitcoin market behavior, price trends, network activity, and investor sentiment. These indicators help investors, traders, and analysts understand the state, trends, and potential price movements of the Bitcoin market. Bitcoin indicators can be divided into on-chain data indicators, market data indicators, and technical analysis indicators. This article will focus on five common technical analysis indicators.

Technical Analysis Indicators

These indicators help predict future price movements by analyzing historical prices and trading volumes. This includes the Relative Strength Index (RSI), the 2-Year MA Multiplier, Bollinger Bands, and MACD (Moving Average Convergence Divergence).

Relative Strength Index (RSI)

RSI, short for Relative Strength Index, is an indicator that measures the speed and magnitude of Bitcoin price changes. It calculates the RSI score based on the performance of the previous 12 months and helps determine market strength and whether it’s in overbought or oversold territory.
Current Index: 60.2

• When RSI > 70: Bitcoin is overbought and may soon drop; it’s a sell signal.
• When RSI < 30: Bitcoin is oversold and may reverse upwards; it’s a buy signal.
  Historical Example:
  In April 2021, Bitcoin reached an all-time high of around $64,000. During this period, the RSI indicator issued an overbought signal: from late March to early April 2021, Bitcoin’s daily RSI consistently stayed above 70, even reaching close to 90, indicating extreme overbought conditions. Despite Bitcoin reaching a new high in mid-April, the price quickly declined. A few days after the RSI overbought signal, Bitcoin’s price corrected and eventually plunged below $30,000 by May 2021.

2-Year MA Multiplier

The 2-Year MA Multiplier consists of two parts: the 2-Year Moving Average (2-Year MA) of Bitcoin’s price and the 5x multiple of the 2-Year MA (2-Year MA x 5). The 2-Year MA represents the average price of Bitcoin over the past two years (730 days), smoothing out price volatility. The 5x multiplier indicates a potential overvaluation zone for Bitcoin.
Current Index:
-2-Year MA: $38,067, 2-Year MA x 5: $190,336

• When the price drops below the 2-Year MA: Buying Bitcoin carries lower risk, making it a potential opportunity for bottom-fishing.
• When the price exceeds the 2-Year MA x 5: Holding Bitcoin carries higher risk, signaling a potential peak and selling opportunity.
  Historical Example:
  On March 12, 2020, during “Black Thursday,” Bitcoin plummeted from $7,900 to around $3,800 due to global market panic from the COVID-19 pandemic. During the crash, Bitcoin fell below the 2-Year Moving Average, well below the 5x multiple, issuing a strong buy signal, indicating extreme undervaluation. From the March low, Bitcoin rebounded quickly, rising throughout the following months, and by the end of 2020, it surpassed $20,000, re-entering a bull cycle. The 2-Year MA Multiplier successfully signaled the rebound after the crash, providing an ideal buying opportunity.

AHR999 Index

The AHR999 index is considered a key reference for value investing (long-term holding) in Bitcoin. It’s calculated by dividing the 200-Day Moving Average (200DMA) by Bitcoin’s current price, reflecting the return rate on Bitcoin for short-term dollar-cost averaging and the deviation of Bitcoin’s price from its expected value.
Current Index: 0.59

• When the index is above 1.2: Indicates that Bitcoin is in a bull market; entering the market is risky, with a high chance of buying at the peak.
• When the index is below 0.45: Indicates that Bitcoin is undervalued and in a relatively certain bottoming range, making it a good time to consider buying.
  Historical Example:
  In the 2018 Bitcoin bear market, the price dropped to around $3,200. At that time, the AHR999 value was close to or below 1, signaling that the market was in a long-term undervalued state, making it a good time to accumulate Bitcoin. The following year, in 2019, Bitcoin experienced a strong rebound in price.

Net Unrealized Profit/Loss (NUPL)

The NUPL (Net Unrealized Profit/Loss) indicator tracks market sentiment by using market value, realized value, and unrealized profits/losses to determine the overall market profitability. NUPL is calculated by subtracting unrealized losses from unrealized profits and dividing by realized market value. NUPL uses 0 as a baseline, with values above 0 indicating the market is in profit, and values below 0 indicating losses.
Current Index: 42.56%

• When NUPL exceeds 75%, the market is overheated, suggesting it’s time to consider selling.
• When NUPL is below 0%, the market is in a loss, indicating a cold state, and it may be time to consider buying the dip.
  Historical Example:
  In April 2021, Bitcoin reached around $64,000, with the NUPL indicator rising above 0.75, entering the “Extreme Greed” zone. This indicated excessive optimism and speculative sentiment. Following this, Bitcoin’s price corrected sharply, and by May, it had fallen below $30,000. NUPL accurately signaled the market top, providing investors with a sell signal.

MVRV (Market Value to Realized Value Ratio)

MVRV calculates the fair price of a cryptocurrency. MVRV is a relative indicator and is the ratio of Market Cap (MV) to Realized Cap (RV). It represents the profitability of BTC holders.
Current Index: 1.45

• When MVRV > 1: The market value exceeds the realized value, indicating that most holders are in profit. This typically suggests a bull market.
• When MVRV < 1: The market value is below the realized value, indicating that most holders are at a loss. This typically suggests a bear market, and the market may be nearing a bottom.
  Historical Example:
  In 2017, Bitcoin surged from around $1,000 at the beginning of the year to nearly $20,000 by December, with market sentiment extremely optimistic. The MVRV index exceeded 4, indicating that the market was significantly overvalued. Most holders were in profit. After reaching this high level, Bitcoin’s price began a significant correction in early 2018, entering a year-long bear market. MVRV accurately signaled the market top, indicating overvaluation.

Conclusion

The above Bitcoin analysis indicators provide reference points for investors, helping them judge the current state of the Bitcoin market and potential buy or sell opportunities. However, it should be noted that most data indicators reveal long-term trends, and may only serve as partial reference points for short-term trading. They are not entirely reliable predictive tools.
Cryptocurrency markets are highly volatile, influenced by global economic factors, policies, and market sentiment. As such, 100% accurate predictions cannot be made based solely on technical indicators. Therefore, investors should approach these data cautiously, using them as one part of their decision-making process rather than the sole basis for their investments.