The $863B Crypto Market May Be Close to Bottom, Mayer Multiple Suggests
The market likely bottomed out in June with the Mayer Multiple dipping below 0.5.
Jul 14, 2022 at 12:13 p.m. UTCUpdated May 11, 2023 at 4:37 p.m. UTC
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The Mayer Multiple suggests the crypto bear market has run its course. (fda54/Pixabay)
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The Mayer Multiple, which measures the difference between an asset's going market value and its 200-day simple moving average (SMA), suggests the crypto bear market has run its course.
- At press time, the Mayer Multiple was 0.53, meaning the crypto market valued at $863 billion was worth almost half of its 200-day average of $1.603 trillion.
- The metric fell below 0.5 last month, with the market value hitting a low of $762.8 billion.
- The previous crypto bear markets ended with the Mayer Multiple falling below 0.5. If history is a guide, the market may have found a bottom at the June low of $762.8 billion.
- Developed by bitcoin investor and podcast host Trace Mayer, the Mayer Multiple helps investors identify oversold and overbought conditions by comparing the market value to the 200-day SMA.
- The assumption is that the market would bounce back or pull back to its mean, represented by the 200-day SMA, after extended downtrends or uptrends. In the past, 0.5 or below readings have marked bottoms. In contrast, readings above 2.4 have signaled the final stages of the bull market characterized by retail investor frenzy.
- The 200-day SMA is one of the most widely tracked gauges of long-term trends. As per technical analysis theory, an asset is said to be in a bear market once its value drops under the 200-day SMA and vice versa.
- "When prices trade below the 200DMA, it is often considered a bear market,” blockchain analytics firm Glassnode's report dated June 24 said. “When prices trade above the 200DMA, it is often considered a bull market.”
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- The Mayer Multiple is not the only indicator signaling an end of the bear market. Recently, on-chain indicators, such as the Puell Multiple and the MVRV Z-score, and a long-term moving average crossover have flashed similar signals.
- However, past performance is no guarantee of future results, more so, as bitcoin (BTC), the leading cryptocurrency by market value, has evolved into a risk-on asset since the crash of March 2020. Therefore, the entire crypto market is more sensitive to factors like the Federal Reserve's monetary policy and inflation than it was during the prior bear markets.
- The U.S. reported inflation at a new four-decade high of 9.1% on Wednesday, spurring bets of a 100 basis point rate hike later this month. The crypto market valuation has declined by 70% since November, predominantly on fears of faster liquidity withdrawal by the Fed.
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Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.