What The Puell Multiple, The MVRV Z-Score and Realized Cap HODL Waves Indicate for Bitcoin's Peak

Bitcoin's price is down almost 30% from its all-time high of $65,000.

Some fear the top is in. The bull market's over. Bitcoin peaked in April.

Is that possible?

Thanks to the transparency of bitcoin’s blockchain, we have data to answer that question.

When you look at spending behaviors, money entering and leaving exchanges, gains and losses among bitcoin wallets, and other information about what people do with bitcoin, you can spot certain patterns that emerge when bitcoin nears its market cycle tops but never any other time.

Three metrics — Puell Multiple, MVRV Z-score, and Realized Cap HODL Waves — can help you decide whether an upswing marks the peak of the market or just the ebbs and flows of a very volatile asset.

The Puell Multiple

The Puell Multiple compares the price of a newly mined bitcoin with the average market value of all mined bitcoins over a given period of time.

When the Puell Multiple gets high, miners tend to sell en masse.

The MVRV Z-Score

MVRV Z-score measures the difference between bitcoin’s present price and the average price people paid for it. When the score gets high, people convert bitcoin into other things.

Maybe they want to cash out their new fortune? Perhaps they fear the market will crash?

For whatever reason, they tend to sell en masse, too — like the miners.

Every bitcoin bull market has ended with the MVRV Z-score at extreme levels.

Realized Cap HODL Waves

While the Puell Multiple and MVRV Z-score can reliably signal market peaks, realized cap HODL Waves offer clues about how close or far those market peaks might be.

Unlike the traditional HODL waves that capture transactions, realized cap HODL waves factor in the realized price of bitcoins that have not moved within certain time frames.

While the full chart gets messy, I pulled out the waves for short-term HODLers, those who have held bitcoin for three months or less. See below, courtesy of Glassnode.

Historically, bitcoin peaks when at least 80% of its market value falls into these bands. Each previous market cycle peak is circled.

But April 2013 wasn’t a peak!

Yes, many people say that.

According to these three metrics, April 2013 marked the top of a 77-week bull market. For the latter part of that run, bitcoin’s price went up for 12 of 13 months.

What followed? An 83% correction. It took almost seven months for bitcoin’s price to recover.

I can understand why people say April 2013 was not a market cycle peak. That’s a fair point — but it was certainly something you’d want to avoid. With this data, you would've side-stepped it.

Behavior as data

The MVRV Z-score and Puell Multiple both measure human behaviors and impute all of the movements of bitcoin from all entities. When they both hit their peaks at the same time, bitcoin hits its peak, too.

At the same time, realized cap HODL Waves confirm the strong hands have moved nearly all of their bitcoin to new entrants, generally people who buy less often, purchase smaller amounts when they do, and sell more quickly when the price drops or when prices go too high, too fast.

As a result, bitcoins flood the market and overwhelm buyers.

That’s happened only four times in bitcoin’s history. Each time, bitcoin’s price dropped at least 67% in the month afterward and as much as 90% to the eventual bottom.

For an asset where big crashes are the norm and every boom seems to go parabolic, this data tells you when to exit or accumulate.

Respect the Metrics

Where can you find these charts?

I advise starting with these websites:

• LookIntoBitcoin
• Woobull
• Glassnode

I’m certain you can find other people who publish this data.

I analyze these and other charts in my newsletter, Crypto is Easy, and they form the basis for my plan for bitcoin’s bull market, which I share with subscribers.

What did those three metrics say about the April 16, 2021 all-time high of $65,000?

Definitely not the peak of the bull market.

As we’ve seen for the entirety of bitcoin's history, it can go up during bear markets and down during bull markets.

While this drop is nothing to worry about, keep these metrics handy for the next time you see extreme movements in bitcoin's price.

With 1,000% returns seemingly mundane over the course of a full bull market and 80% losses standard for each bear market, even a small advantage can mean the difference between a devastating loss and a massive windfall.

Mark Helfman publishes the Crypto is Easy newsletter. He is also the author of three books and a top bitcoin writer on Medium and Hacker Noon. Learn more about him in his bio.

This post originally appeared in the May 2021 issue of Luckbox.