Identifying Cycle Tops & Bottoms

Understanding Price Drawdowns

Price drawdown measures how far an asset has fallen from its all-time high (ATH). A key indicator for identifying market cycles and timing opportunities. Notably, Bitcoin has shown diminishing losses in each cycle.

Price Drawdown Formula:

(Current Price - ATH) / ATH × 100

Percentage decline from all-time high

Bitcoin drawdowns of 70-85% historically mark cycle bottoms and accumulation opportunities, while 0-20% drawdowns often signal cycle tops and distribution phases.

Key Patterns:

70%+ drawdowns: Cycle bottoms and capitulation. Examples: 2018 (-84%), 2022 (-77%)

0-20% drawdowns: Potential market tops with euphoria and media coverage

30-50% drawdowns: Mid-cycle corrections, not major bottoms

Price Drawdown from ATH

1 Year ROI Analysis

ROI-Based Cycle Analysis

The 1y ROI measures percentage gain/loss over a rolling 365-day period, helping identify overheated markets and cycle reversal points. Bitcoin has notably experienced diminishing returns each cycle, as it takes more liquidity to move the market, relative to market capitilization. This metric can be applied to any asset.

1-Year ROI Formula:

(Current Price - Price 365 Days Ago) / Price 365 Days Ago × 100

Rolling 365-day percentage return smoothing short-term volatility

ROI >300-500% signals overheated conditions and potential tops. Negative ROI periods mark accumulation opportunities.

Key ROI Levels:

500%+ ROI: Extreme euphoria. Historical peaks: 2017 (1300%), 2021 (300%)

100-300% ROI: Healthy bull market with sustainable growth potential

Negative ROI: Bear market bottoms. 2018 (-85%), 2022 (-65%) marked entries

Understanding Realized Cap

Realized Cap represents the total value of all Bitcoin at the price each coin last moved, providing insight into actual capital flows rather than just market cap speculation.

Unlike market cap (price × supply), Realized Cap weights each coin by its last transaction price, filtering out dormant or lost coins. When Realized Cap rises, it indicates net capital inflow - new money entering Bitcoin. When it flattens or declines, it suggests distribution or selling pressure.

Steep Realized Cap increases during bear markets often mark smart money accumulation phases. Flattening or declining Realized Cap during bull runs can signal distribution by early investors.

Reading Capital Flow Patterns:

Rising Realized Cap: Net capital inflow - investors buying and moving coins, healthy accumulation

Flattening Realized Cap: Reduced new capital - existing holders holding, potential distribution phase

Declining Realized Cap: Net capital outflow - selling pressure from existing holders, bearish signal

Price vs Realized Cap gap: Large gaps indicate overvaluation (tops) or undervaluation (bottoms)

Cycle Timing Applications:

Bear market accumulation: Rising Realized Cap + falling prices = smart money accumulation phase

Bull market distribution: Flattening Realized Cap + rising prices = early investor profit-taking

Chart Analysis Tips:

Note the relationship between Bitcoin price (white line) and Realized Cap (orange line). When price trades far above Realized Cap, markets are often overheated. When price approaches or falls below Realized Cap, it typically represents strong value territory and accumulation opportunities.

Realized Cap & Capital Flows

MVRV Statistical Bands

The MVRV ratio (Market Value to Realized Value) compares Bitcoin's current market cap to its realized cap, revealing whether Bitcoin is trading above or below its aggregate cost basis. When MVRV > 1, holders are in profit on average; when MVRV < 1, holders are underwater.

MVRV is calculated as: Market Cap ÷ Realized Cap. A ratio of 2.0 means Bitcoin trades at twice its realized value, indicating significant unrealized profits. Historical MVRV peaks above 3.7 have marked major cycle tops, while values below 1.0 often signal accumulation opportunities.

Rather than using fixed lines at MVRV = 1 or MVRV = 2, statistical bands provide dynamic, data-driven levels that adapt to Bitcoin's evolving market behavior. These bands identify when Bitcoin is statistically overvalued or undervalued relative to its actual historical distribution, not arbitrary round numbers.

The statistical bands are calculated using mean ± 1 standard deviation from historical MVRV ratios. The system provides both all-time (cumulative) and 4-year rolling window calculations, showing how valuation extremes evolve over time.

Fixed lines like MVRV = 2 ignore Bitcoin's changing market dynamics. Statistical bands automatically adjust as Bitcoin matures - what was extreme in 2017 may be normal in 2024. This adaptive approach provides more accurate signals than static thresholds.

Statistical vs. Fixed Levels:

Upper bands (+1σ): Data-driven overvaluation thresholds that evolve with market maturity, not fixed at arbitrary levels like MVRV = 3

Average line: Historical mean that adapts over time - more accurate than assuming MVRV = 1 is always "fair value"

Lower bands (-1σ): Statistical undervaluation zones based on actual distribution, not static lines

4-year vs All-time: Rolling bands capture market evolution while all-time bands show absolute historical context

Trading Applications:

Use statistical bands for position sizing and risk management. When MVRV approaches upper bands, consider reducing exposure or taking profits. When approaching lower bands, consider increasing allocation. The raw MVRV ratio provides the actual valuation context for these statistical levels.

MVRV Ratio with Statistical Bands

MVRV Z-Score Analysis

Understanding MVRV Z-Score

MVRV Z-Score standardizes the Market Value to Realized Value ratio, identifying when Bitcoin trades at statistical extremes relative to its "fair value" baseline. This metric has accurately predicted major market tops and bottoms throughout Bitcoin's history.

MVRV Z-Score Formula:

Z-Score = (MVRV - Mean) / Standard Deviation

Statistical standardization of MVRV ratio identifying market extremes

Historical Accuracy:

MVRV Z-Score > 7 has marked every major Bitcoin top with remarkable accuracy, preceding 80%+ corrections. Despite this, the MVRV Z Score will most certainly face shortcomings in cycles to come. As deviations of volatility diminish, the reliability of the indicator will also decrease.

Key Z-Score Zones:

Z-Score > 7: Extreme overvaluation - major top signal

Z-Score 2-7: Overvalued - consider profit-taking

Z-Score < 0: Undervalued - accumulation opportunity

LTH Profit-to-Volatility Ratio

New Indicator:

Created by Tristan Colt in 2025, the LTH Profit-to-Volatility Ratio normalizes long-term holder profits by Bitcoin's historical volatility to identify market extremes.

This indicator asks a crucial question: "How extreme are long-term holder profits relative to Bitcoin's inherent volatility?" By dividing unrealized profits by historical standard deviation, it automatically adjusts for Bitcoin's changing market dynamics over time.

LTH PVR Formula:

LTH PVR = (LTH Market Cap - LTH Realized Cap) / std(LTH Market Cap)

Normalized deviation measuring LTH profit extremes relative to volatility

Although similar to Z Score, this creates a normalized deviation that measures profit extremes, not just price movements. When profits are 3.5+ times normal volatility, history shows major tops. When LTHs are underwater relative to volatility, generational bottoms form.

Readings above 3.5 have historically coincided with major Bitcoin tops. Readings below 0 are rare and indicate that even long-term holders are underwater, which has marked significant market bottoms.

The Magic Numbers:

PVR > 3.5: Extreme overvaluation - (2011: 3.7+, 2013: 4.0+, 2017: 4.0+, 2021: 3.7+)

PVR 2.0-3.5: Overheated market - consider profit-taking

PVR 0-2.0: Normal bull market progression - healthy profit levels

PVR < 0: Generational opportunity - LTHs underwater (all prior bottoms)

Why It Works So Well:

Smart Money Detection: LTHs are battle-tested investors. When they sell, they are not panicking. They simply see extreme profits in their portfolios.

Behavioral Economics: When profits hit 3-4x normal volatility, even diamond hands start taking profits

Self-Reinforcing: LTHs selling at tops creates new STHs; STHs capitulating at bottoms creates new LTHs

Volatility Adjustment: Automatically adapts - 100% profit in 2012 was normal, in 2024 might be extreme

Why Negative Readings Are So Rare:

Long-term holders (155+ days) are by definition patient investors who have proven their conviction. They typically hold through losses rather than capitulate, and many acquired coins at much lower historical prices. When LTHs do sell at losses, those coins exit the LTH category, creating a natural floor effect. This is why readings below 0 are so significant - they represent truly exceptional market stress.

Key Advantage:

The indicator measures what long-term holders are experiencing, adjusted for Bitcoin's volatility. This normalization helps identify when profit levels are extreme relative to historical norms.

LTH Profit-to-Volatility Ratio

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NUPL Cohort Risk: The Complete Picture

Next Level Analysis:

Taking our analysis one step further, the NUPL Cohort Risk chart combines five critical unrealized profit metrics using advanced statistical techniques to create a comprehensive market risk assessment tool.

This chart synthesizes insights from Short-Term Holders (STH), Long-Term Holders (LTH), Overall Market NUPL, AVIV-NUPL (Active Value weighted), and the LTH Profit-to-Volatility Ratio. By applying dynamic standard deviation techniques to each metric, we can identify market phases with unprecedented accuracy.

The Five Pillars of Analysis:

STH NUPL: Short-term holder sentiment - captures retail and recent buyer psychology

LTH NUPL: Long-term holder profits - reveals smart money positioning and distribution

Overall NUPL: Market-wide sentiment - comprehensive view of all Bitcoin holders

AVIV-NUPL: Active Value indicator - focuses on economically active coins using Cointime Economics

LTH PVR: Profit-to-Volatility Ratio - normalized profits relative to market volatility

The chart combines NUPL metrics with the normalized LTH PVR using equal weights (50% NUPL + 50% PVR), creating a unified risk score. Dynamic volatility-adjusted quartiles automatically adapt to changing market conditions, while colored dots clearly indicate current market phases from max pain (dark blue) to euphoria (red).

Technical Implementation:

The system uses rolling 4-year windows to calculate dynamic standard deviations, ensuring the model adapts to Bitcoin's evolving market structure.

Market Risk Phases:

Max Pain: Extreme fear, capitulation - generational buying opportunity

Capitulation: Heavy losses, despair - strong accumulation zone

Fear: Uncertainty dominates - early accumulation opportunity

Optimism: Healthy market conditions - trend continuation likely

Greed: Elevated profits - consider profit-taking strategies

Euphoria: Extreme greed, overvaluation - major top warning

Why This Approach Works:

By combining multiple cohort perspectives with volatility normalization, this chart captures both micro (STH behavior) and macro (LTH distribution) market dynamics. The statistical approach removes arbitrary thresholds, instead using data-driven levels that evolve with Bitcoin's maturation. This comprehensive view helps identify not just when markets are overheated or oversold, but also which participant groups are driving the action.

Comprehensive Framework:

This multi-metric approach combines NUPL cohort analysis with volatility-normalized profit ratios to create a unified risk assessment framework that automatically adjusts to changing market conditions and participant behavior.

NUPL By Cohort Risk Analysis

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About NUPL by Cohort Risk

This advanced risk analysis chart combines multiple Net Unrealized Profit/Loss (NUPL) metrics with the Long-Term Holder Profit-to-Volatility Ratio (LTH PVR) to provide a comprehensive multi-dimensional view of market sentiment and risk levels. The chart uses a sophisticated statistical model with dynamic volatility-adjusted quartiles to identify market phases and risk zones.

Cohort Types:

Overall NUPL: Market-wide unrealized profit/loss
STH-NUPL: Short-term holders (< 155 days) sentiment
LTH-NUPL: Long-term holders (> 155 days) sentiment
AVIV-NUPL: True market mean using cumulative investor cap
LTH PVR: Long-Term Holder Profit-to-Volatility Ratio, toggleable between cumulative and rolling window (4-10 years), normalized using tanh function

Calculation Methodology:

Combined Risk Score: 50% NUPL + 50% normalized LTH PVR for balanced risk assessment
LTH PVR Normalization: tanh(raw_PVR / 2.5) to map values to -1 to 1 range
Volatility Window: Toggleable between cumulative (all historical data) or rolling window (4-10 years) standard deviation for PVR calculation
Market Phases: Dynamic quartile-based statistics applied
Risk Dots: Color-coded price dots based on combined NUPL+PVR risk levels

Market Phase Risk Zones:

Max Pain (< -25%): Extreme capitulation, generational buying opportunity
Capitulation (-25% to 0%): Bear market bottom formation, accumulation zone
Fear/Hope (0% to 25%): Early bull market, recovery phase
Optimism (25% to 50%): Mid-cycle momentum building
Greed (50% to 75%): Strong bull market, distribution beginning
Euphoria (> 75%): Market overheating, major top risk

This chart combines NUPL metrics with the LTH Profit-to-Volatility Ratio (toggleable between cumulative and rolling window) to create a sophisticated risk assessment tool. The equal weighting (50/50) between NUPL and normalized PVR provides balanced signals that account for both unrealized profit/loss and volatility-adjusted profitability. The colored vertical bands and risk dots help identify market phases and potential turning points with greater precision than single-metric approaches. Use the controls above to switch between cumulative PVR (all historical data) or rolling window PVR (4-10 years).

Explore individual charts for detailed analysis and additional controls