Bitcoin (BTC) is back to the $65,000 price level amid a nearly 9% drop since April started. Cryptocurrency traders and investors wonder if BTC has reached a price top this cycle, or what signals to watch for.
Forecasting market tops and bottoms with precision is tricky and deemed a difficult task even for the most successful traders. However, experienced investors can look for historical indicators, patterns, and signals to make educated guesses based on the event’s probability.
In particular, Charles Edwards, founder of Capriole Investments, raised 13 Bitcoin top signals to watch for this cycle. The experienced trader posted these top signals in a thread on X (formerly Twitter) on April 2, explaining their relevance.
“Monitoring these metrics is much more important than any predictions or price targets. 30% of the metrics are at high-risk today. I always position around the data at hand. We have quite a few elevated readings today which justify closer monitoring for a cycle top. It’s likely still some time away, but don’t get transfixed on an arbitrary dollar target or the FOMO of a possible supercycle.”
– Charles Edwards
4 Bitcoin on-chain metrics that could be top signals
Notably, four out of the 13 Bitcoin top signals to watch for this cycle are already at high risk. Finbold retrieved these metrics from Charles Edwards’s on-chain analysis, and they are as follows.
Hodler Growth Rate slowing down is a Bitcoin top signal
First, the Hodler Growth Rate (HGR) slowing down can indicate what Edwards called “diamond hands start selling into profit.” Historically, when Bitcoin’s inactive supply for two years or more stops growing, this could be a cycle’s top signal.
At this point, HGR has been three months without making new highs, while previous cycles topped after six to nine months of this pattern.
Dormancy Flow
Second, Capriole Investments’ founder has seen increased activity by dormant Bitcoin wallet addresses, which is concerning in his opinion.
“Quite concerning today, Dormancy Flow has peaked significantly suggesting the average age of coins spent is significantly higher in 2024. Peaks in this metric (z-scored) typically see cycle tops just 3 months later.”
– Charles Edwards
Percent of Bitcoin Addresses in Profit
Third, the analyst is looking at over 95% of Bitcoin addresses in profit, which is also a relevant top signal. Essentially, the more holders in profit, the more likely it is for a massive profit realization activity to ignite.
Charles Edwards points out that the new all-time highs over the last month have accelerated this process, that already started. If Bitcoin price starts to drop and, thus, the percentage of addresses in profit, the market could soon see a bearish trend taking place.
U.S. Liquidity
Finally, the fourth high-risk metric pointing toward a top signal for Bitcoin is the year-over-year liquidity change of United States financial institutions.
“Liquidity drives markets. There’s a very strong correlation with this chart and Bitcoin’s price history. Up is good for Bitcoin, down is bad. In the last two weeks we have possible signs of a (local) top. If this downtrend persists, that would be concerning.”
– Charles Edwards
In conclusion, the expert investor warns of starting signals of a possible top to Bitcoin and cryptocurrency prices this cycle. Nevertheless, these metrics are still not in a critical phase and Capriole Investments sees a likely further bull market mid-term.
Yet, investors should start to monitor these and other relevant top signals to make long-term profitable decisions while investing in Bitcoin and other cryptocurrencies.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
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