Many cryptocurrency enthusiasts have heard of the Pi Cycle Top indicator, which has “magically” predicted the peaks of several previous bull markets. However, few know that there is also its opposite, Pi Cycle Bottom, which also has some track record in trying to estimate the bottom of a bear market.
But before we take a closer look at Pi Cycle Bottom, let’s remind ourselves why its bullish nemesis has earned so much popularity.
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The historic effectiveness of the Pi Cycle Top
We first wrote about the Pi Cycle Top on BeInCrypto over a year ago, when Bitcoin was close to reaching its previous all-time high (ATH). The indicator is based on the relationship between the double of the 350-day DMA and the 111-day DMA. The signal fired on April 12, 2021, and just two days later, Bitcoin reached a historic ATH of $64,900.
This high accuracy of the Pi Cycle Top was not an exception, as the indicator has been very effective in previous cycles as well. All 3 historical ATHs of previous bull markets coincided with the signal flashing up no more than 5 days before or after the peak.
The only ATH during which the Pi Cycle Top was far from crossed is the most recent one. On November 10, 2021, when BTC reached $69,000, the indicator failed to generate a signal. At the time, this was interpreted as a sign that the second wave of the bull market was not yet over. Today we know that the indicator failed in this case.
Pi Cycle Bottom and the end of a bear market
Pi Cycle Bottom is the opposite of Pi Cycle Top. The bearish version is the relationship between the 471 SMA and the 150 EMA. Moreover, the former is multiplied by a factor of 0.745. Not a very elegant construction, but historically quite effective.
As it turns out Pi Cycle Bottom indicator could be successfully used to estimate the area of the absolute bottom of two previous bear markets (blue lines).
The first time the 150 EMA fell below the 471 SMA was on January 16, 2015. This happened just two days after the absolute bottom of the BTC price at $152.
The second time the Pi Cycle Bottom generated the same signal was on December 16, 2018. This happened just one day after the absolute bottom of the previous bear market at $3122.
We are currently approaching the third signal in history and another bearish crossing of the two moving averages (blue circle).
When will Bitcoin bottom out?
If the relationship between the intersection of the two moving averages and the bottom of the BTC price repeats itself in this cycle, Bitcoin could soon reach the bottom of this bear market. Currently, the 150 EMA has begun the sharp decline characteristic of the recent capitulation phase. A crossover is likely in the coming days.
Cryptocurrency market analyst @TheRealPlanC tweeted his own prediction of the date of the intersection and reaching a hypothetical bottom for Bitcoin. Based on the movement trajectory of the two curves, he estimated that the intersection will occur on July 9, 2022.
If this were to happen, then in exactly 15 days the Pi Cycle Bottom would generate a signal that very accurately indicated the bottom of the BTC price in the previous two iterations.
One step further went another analyst @el_crypto_prof, who combined the potential signal from the Pi Cycle Bottom with a fractal analysis of previous cycles. In his opinion, if a potential Bitcoin bottom were to happen in the near future, it would fit well with analogies between previous cycles.
In the chart above, we can see that for the entire period from April 2021, the analyst includes the post-ATH correction phase highlighted in red. It also includes the latest ATH at $69,000 reached on November 10. Although technically a higher BTC price was reached then, many technical and on-chain indicators suggest that it was already a bear market.
Perhaps this was also the reason why the Pi Cycle Top did not generate a proper signal. If this is true and the correction in the BTC market has been going on for more than a year, then indeed we can soon expect an end to the long-term decline. The Pi Cycle Bottom indicator is just an additional layer of confluence that may make this scenario more likely.
For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.
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