Cryptocurrency trading has become increasingly prevalent in our society, with more and more people relying on it as a ticket to financial freedom. Due to strategies without a clear purpose and insufficient education from a fundamental standpoint, investments have a negative rate of return. Robots and automated scripts that trade according to predefined rules can be used. Still, if programming such machines were easy, everyone would be successful.

The cryptocurrency market is the most difficult to trade for beginners because it’s open 24/7, which causes fatigue and the fear of missing out (FOMO). You risk making irrational decisions that prioritize short-term gains over long-term financial stability. The connectedness between Bitcoin and other digital assets adds a complicated twist. Learning how to buy Bitcoin can seem difficult at first, but it’s actually a hassle-free process. The challenge lies in finding trading opportunities, which requires patience and experience.

It’s always wise to do your due diligence before putting your hard-earned money on the line. Traders and investors place reliance on various metrics to get clear, actionable insights so they can see what’s working, what’s not, and where they can improve. Whether you’re a beginner or an experienced buyer, technical indicators can help you maximize profits and minimize risk.

To excel, especially in the cryptocurrency market, you need to monitor specific metrics, such as:

Pi Cycle Top

The Pi Cycle Top indicator is effective in timing market cycles, often within a three-day window, allowing you to bow low and sell high. It was introduced by Phillip Swift, an analyst and founder of the analytics platform Look Into Bitcoin, in April 2019. The technical tool uses a combination of two moving averages: the 111-Day Moving Average (111DMA) and the 350-Day Moving Average (350DMA). The ratio of 350 to 111 is 3.153, surprisingly close to Pi (3.142).

The cryptocurrency market experiences a period of rapid and unsustainable price increases, driven by superfluous speculation and investor exuberance, when the shorter-term 111DMA reaches twice the value of the longer-term 350DMA. It’s a good time to sell because Bitcoin’s price may reach a peak. Of course, there have been instances where the BTC price fell considerably even without the moving averages crossing over.

The Bitcoin Everything Indicator

As opposed to models that rely too much on specific signals, such as the MVRV Z-Score, which shows if Bitcoin is overvalued or undervalued relative to its “fair” price, the Bitcoin Everything Indicator distributes influence equally across several categories. Bitcoin is sensitive to fluctuations in global liquidity, so macroeconomic factors impact valuation. When liquidity expands, Bitcoin starts rising. The pro-cryptocurrency stance and overall rhetoric coming from Donald Trump provide renewed confidence for the price of Bitcoin.

The Bitcoin halving, which occurs roughly every four years, and the computational power used to mine and process transactions on the blockchain impact demand and market confidence. More than 19 million coins are in circulation today, and they risk causing inflation. As difficulty grows, miners earn fewer tokens for the same amount of work. The Puell Multiple helps estimate the level of sell pressure in the market.

On-chain analysis can help you gauge market sentiment, monitor whale activity, and make informed investment decisions. While the MVRV Z-Score is one of the best tools available for timing market cycle peaks and bottoms, it has its limitations. Also, the Spent Output Profit Ratio (SOPR), which reveals whether Bitcoin is sold at a loss or profit, can be misleading and fail to provide a complete picture.

The Bitcoin Everything Indicator streamlines the investment process by bringing together the vital components that shape Bitcoin’s price dynamics.

Stock-To-Flow Model

The Stock-To-Flow (S2F) ratio, initially designed for precious metals, can be applied to Bitcoin due to its limited supply. Bitcoin is capped at 21 million coins, and its hard cap can’t be changed due to incentive and governance models in the protocol – miners, nodes, and developers would have to give the green light to any modification. The S2F is calculated by taking the production in ten days, dividing it by 10, and then multiplying by 365 to obtain the estimated yearly production.

You get the Stock-To-Flow ratio by dividing Bitcoin’s circulating supply by its annual production rate, which is expected to decrease in the next halving event, scheduled for 2028. Attention must be paid to the fact that the S2F ratio doesn’t take into account market volatility or unexpected economic shifts. Some critics argue that the model depends on questionable assumptions, so it should be used in tandem with other indicators.

Hash Ribbons Indicator

The Hash Ribbons indicator leverages simple daily moving averages to understand whether the hash rate is in a precipitous decline. This technical tool, developed by Charles Edwards, one of the leading publishers of on-chain Bitcoin models globally, identifies potential market bottoms and bullish trends. The rise in the hash rate suggests that new miners are joining the Bitcoin network and/or expanding their facilities. Miners are holding their ground, undeterred by cryptocurrency market fluctuations.

To reduce the possibility of the price falling to no more than 15% below the buy signal, Charles Edwards recommended adding two moving averages: the 10-Day Moving Average and the 20-Day Moving Average. However, it’s enough to look at the behavior of the 30-day and 60-day moving averages. Suppose the 30-day MA crosses above the 60-day MA. In that case, it marks the end of the miners’ “capitulation” phase and the beginning of a recovery. When the 30-day moving average falls below the 60-day moving average, mining Bitcoin is financially unsustainable.

Endnote

You can choose from countless technical indicators to separate meaningful cryptocurrency market movements from random noise. The key is selecting the right combination of metrics that complement one another and align with your trading style, so proceed in a leisurely fashion. Understanding the risk of a trade and how to properly balance your portfolio is more important than entries and exits.

Combine different indicators, validate insights, and refine your strategy for varying conditions to become successful in trading Bitcoin. Trading has nothing to do with luck.