Welcome, this is whalehunter 👋
This guide will be the first in a series on teaching you how to navigate the crypto market and use on-chain analysis to predict market tops and bottoms.
It’s relatively easy if you stay up-to-date with what is happening (follow me on Twitter https://twitter.com/eth_whalehunter), are patient, and can control your emotions during the dreadful bear market periods and the euphoric hype cycles.
With that said, let’s get started.
(A better formatted version of this post is available on substack)
Bitcoin and crypto are highly volatile. Thus, new investors in the space find it difficult to navigate the volatility and often fall into the emotional trap of buying the tops and selling the bottoms.
Like all markets, the crypto markets move in cycles. First, you have long bear markets where no one is interested in buying Bitcoin, ETH, or other cryptocurrencies; then you have the bull run where everyone is fomoing into the market with the hope of becoming wealthy.
If you want to be successful in crypto, you need to know how to navigate the crypto markets and understand the phase we are in.
This post will introduce some of the best on-chain tools that allow you to see if BTC is at an all-time high or low without focusing too much on the price.
Many of these tools allowed me to sell most of my crypto holdings close to the top in December 2021.
Puell Multiple The puell multiple is one of the easiest ways to determine if it’s an excellent time to buy or sell Bitcoin. You can find a free puell multiple Bitcoin chart on checkonchain.
How does it work?
Well, the puell multiple is calculated by taking the ratio of daily BTC issuance in USD divided by the 365-day moving average of daily coin issuance in BTC.
It measures how often miners complete a block and how active they are.
If the crypto market is very profitable, miners have a greater incentive to sell their mined coins quickly. (taking profit).
Low minter profitability is present if the hash power is much lower than the yearly average. This can create income stress, and some miners may need to start reducing their hash power by switching off their mining rigs.
This will increase the remaining miners’ hash share. The remaining miners can then reduce their selling pressure.
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High puell multiple values = high mining profitability → More pressure to take profits.
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Low puell multiple values = low mining profitability → Low selling pressure.
How do you use it to time the market?
Pull up the Bitcoin Puell Multiple chart on your browser and familiarize yourself with it. You need to focus on the blue graph at the bottom of the chart.
You can figure out where in the cycle we are based on the red, orange, white, light green, and green levels.
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Red (Puell Multiple > 5) = You should be selling 75%+ of your BTC portfolio. Furthermore, you need to set sell orders for your altcoins as they often pump after BTC pumps.
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Orange (Puell Multiple > 2.5) = You should sell up to 25%+ of your BTC/alts on upward moves. This will give you a lot of capital to buy back during capitulation events.
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White (Puell Multiple 0.6 - 2.5) = Ideally, no trade zone. You chill here. If you want to benefit from volatility, you can trade with less than 5% of your portfolio.
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Light green (Puell Multiple > 0.4 - 0.6) = You can dollar cost average (DCA) in a bit, but it’s better to save your capital for when the Puell Multiple goes below 0.4
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Green (Puell Multiple < 0.4) = Buy as much as you can afford to lose. Capitulation events are incredibly profitable buys at these levels as you have better odds.
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