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Bitcoin investment can be as simple or complex as you choose. However, by leveraging some free and powerful metrics, investors can gain considerable advantages over average market participants. These tools are available for free, simplifying chain analysis and helping deprive emotional decisions.
Achieved hat wave
The implemented cap hodl wave is one of the more nuanced tools in the on-chain toolbox. It analyzes the realized prices, which is the average cost basis for all Bitcoins on the network and crashes it by age group. A significant age group is holding coins for three months or less. When this segment dominated the already achieved cap, it indicated a flood of new capital entering the market, usually driven by retail FOMO. The historic peaks in these young stocks (usually shown in warm colors on the chart) match the tops of major markets, such as late 2017 and 2021.
Conversely, when the short-term holder’s impact drops to a low, it usually remains consistent with the bottom of the bear market. During these periods, few new buyers entered, and their emotions were bleak and their prices were deeply discounted. This indicator can visually enhance counter-trend strategies, buying when others are afraid and sell when greed rule.
Mull multiple
The multiple majority of PUELL can help assess the emotions of miners by comparing their current daily income (in USD) with expenses to the average of one year. High value indicates that miners are very profitable, while low value indicates trouble, potential signaling underestimate.
In previous cycles, PUELL’s multiple lows were a great opportunity to accumulate as they also struggled to stay profitable with miners of high cost and operational risks. This acts as an entry signal for the economy and high trust.
MVRV z score
The MVRV Z score is probably the most widely recognized metric in the on-chain arsenal. It normalizes the ratio between market value (current price multiplied by circular supply) and realization value (average cost basis or realization price) to normalize it in the history of Bitcoin’s volatility. This Z score determines extreme market conditions and provides obvious signals to the top and bottom.
Historically, a Z score above 7 indicates that the euphoric market conditions at the local top are mature. Z scores below zero are usually aligned with the most attractive accumulation period. Like any metric, it should not be used in isolation. This indicator is very effective when combined with some other discussed at the confluence discussed in this analysis.
Funding rate
Bitcoin financing rates reveal the views of futures traders. Positive funds mean that craving shorts indicate bullish bias. Extremely high funds usually match euphoria and before correction. Instead, negative funds show fear and can be before a sharp sequel.
As traders risk their BTC directly, the coin-described funding rate provides a purer signal than the dollar pair. A spike in either direction usually indicates a counter-trend opportunity and warns that overheating and low or negative rates are high.
soprano
The output margin of expenditure (SOPR) tracks whether there are links or losses that are moved on the chain when trading. Readings above zero mean that the average currency movement is sold for profit; below zero indicates the realized loss.
Sharp spikes indicate surrender and investors lock in losses. These often mark fear-driven sell-offs and major buying opportunities. Continuous SOPR readings above zero may indicate an uptrend, but excessive profits may indicate an overheating of the market.
in conclusion
By stratifying these indicators: the realized hat HODL wave, PUELL multiplex, MVRV Z score, funding rate and SOPR, investors get a multidimensional view of the Bitcoin market state. None of the metrics provides all the answers, but several confluences increase the likelihood of success. Whether you accumulate in a bear market or distribute it near the potential top, these free tools can help you remove emotions, follow the data and greatly improve the advantages of the Bitcoin market.
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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Be sure to do your own research before making any investment decisions.