TLDR: In a mini series of indicators that predict the bull market price top for Bitcoin, we first look at the infamous Pi Cycle Top Indicator. In the past, it has flashed close to tops or local tops, distinguishing it from normal bull and bear crosses, which lag changes in market conditions. But it’s very well possible that it won’t flash this time around, but only come close.
The Pi Cycle Top indicator ‘flashes’ when BTC’s 111-day moving average crosses above double the value of the 350-day moving average. This can only happen after periods of fast price appreciation.
Why the word Pi? Because 350 divided by 111 is 3.153, which is rather close to 3.142, the approximate value of Pi. It’s a cute coincidence but a coincidence only: a different set of parameters would bring us closer to Pi, for example 349 and 111. But these parameters apparently fit the price data less well than 350 and 111. So, it’s just a nice name that sticks.
The Pi Cycle Top Indicator has had four Bitcoin top signals since 2013. Each signal occurred within a few days of a major peak in bitcoin’s price. The chart below shows how each one panned out.
The indicator has flashed so reliably, it’s as if someone who knew the chart simply put a neat pin on each top!
Here’s the same chart that also includes the moving averages that constitute the Pi Cycle Top Indicator.
The dashed vertical red lines are the places where the indicator flashed.
Right off the bat, it’s important to note that the Pi Cycle Top Indicator (created by Philip Swift, founder of crypto analytics platform LookIntoBitcoin) was created in 2019. Why is this important? Because it was designed to retroactively fit the price data: ‘let’s see which combination of moving averages predicts tops best in hindsight’. That is of course less impressive than predicting price action.
That’s why people in 2021 were eagerly awaiting the bull market top. Would the Pi Cycle Top Indicator flash close to the top?
Well, it did and it didn’t. Here’s the chart.
On April 12, the Pi Cycle Top indicator flashed. Two days later, the BTC price peaked and subsequently fell more than 50% to below 30k.
Pretty good. But BTC had not made its all-time high yet in the cycle. In November 2021, the BTC price peaked, printing a higher value than in April 2021.
This shows that the Pi Cycle Indicator can flash without BTC price topping out. And the actual top can happen without a flash.
Still, with those caveats, the Pi Cycle Indicator Flash in April 2021 was very close to the local top – and this local top was in price very close to the final top of the cycle.
In other words: no one would have regretted selling when the Pi Cycle Top indicator flashed.
Prior to 2021, the last time the indicator flashed was on December 16th 2017, one day before the bull market top.
In 2013, it flashed twice. The first time was on April 5th.
The BTC price almost doubled in the first four days after.
Subsequently, BTC dropped 65% over the next two weeks.
The second BTC Pi Cycle top signal was triggered on December 3rd, 2013, just one day before BTC’s cycle peak.
Crosses Get More Muted
In 2013 the two periods where the moving averages crossed were more than 100 days. In 2017 they crossed for about 75 days and in 2021 only ten…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
