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Bitcoin has plenty of scope for extending its current rally, a price indicator suggests, even as the cryptocurrency is quickly closing on the nearly $ 20,000 record set three years ago.
With prices surging 80% to levels above $ 18,000 in the past six weeks, the cryptocurrency’s Mayer Multiple – the ratio of the price to the 200-day moving average – has risen to a 16-month high of 1 , 67. However, the metric is still well below the 2.4 threshold which historically marked the final stage of bull markets.
The Mayer Multiple showed similar values around the second halving of bitcoin’s mining reward in July 2016. At the time, bitcoin was trading at $ 650 and reached highs near $ 20,000 in December 2017.
The ratio rose above 2.4 on December 1, 2017, after which bitcoin’s value doubled to $ 20,000 in just two weeks before returning to $ 12,000 on December 22. Similar price action was seen in April and November 2013 after the ratio rose above 2.4. Bitcoin also reached $ 13,880 at the end of June 2019 with a ratio rising above 2.4.
With the Mayer indicator currently hovering at 1.67, bitcoin appears to be in the early stages of the bull market, with plenty of room to extend the rally from the low of $ 3.867 seen since mid-March.
According to Nischal Shetty, CEO of the Mumbai-based cryptocurrency exchange WazirX, bitcoin is replicating the price movements seen after the previous halving: four-year reductions in premiums for miners. The cryptocurrency suffered its third halving on May 11, when prices were around $ 8,600.
While the recent steep $ 10,000 rise looks similar to the $ 6,000 to $ 20,000 surge seen in November-December 2017, this time around it may be different. Institutions appear to have been the main driver of the latest rally, while the one seen three years ago was driven by speculative frenzy and panic buying by retail investors.
Google Trends, a barometer used to measure retail interest in trending topics, is currently returning a value of 13 for the worldwide search query “bitcoin price”. It is significantly lower than the value of 93 observed in early December 2017.
This is a likely sign that FOMO has yet to conquer the market. Retail investors are usually the last to attend a rally. As such, higher retail participation is widely considered a sign of an asset close to the maximum.
Google’s search data seems to validate the Mayer Multiple signal that the market is not yet “euphoric” and that the ongoing rally has legs.
WazirX’s Shetty expects retail investors to go up once prices break above $ 20,000.
As of press time, bitcoin is changing hands close to $ 18,030, representing a 150% year-to-date gain, according to The CoinDesk 20.
Disclosure: The author occupies a small position in bitcoin and litecoin.
