The Crypto Comms #39; Pi-Cycle Indicator Flashes Green

Chris on Crypto
5 min readJan 31, 2023

Bitcoin reached $23,900 on Sunday before cooling off in the following hours. At the time of writing, BTC/USD is flat on the day, but that’s sure to change after this week’s FOMC meeting.

In this issue:

  • Bitcoin analysis
  • On-chain data
  • FOMC meeting
  • Closing remarks
  • Latest happenings
  • Listening material

Bitcoin analysis

BTC/USD corrected 6% after getting rejected at $23,970 on Sunday. Price has held at the H12 20-ema ($22,700) so far but it remains to be seen whether enough buying interest will materialise at the first discount zone. Aggressive buyers will have already positioned at the level, but tomorrow’s FOMC meeting is bound to create enough volatility to shakeout paper hands.

The daily equivalent moving average rests at $21,800, which tends to be reliable support when initially tested after a breakout (assuming the market is trending). That said, low-time-frame liquidity levels line-up with the 20-daily ema, offering positive confluence for bulls to have another go at $25,000 (200-week ema). On the flip-side, a mean reversion lower could take Bitcoin back to the teens to on-chain support indicators (which have turned positive). This scenario is by no means guaranteed, but it is still a possibility.

BTC/USD daily time-frame; 20-exponential moving average (white dotted line)

Zooming out, Bitcoin is wedged in between two weekly moving averages — the $20,200 (20-wema) and $24,900 (200-wema) levels. Doing business at either of these MA’s appears to have the most desirable risk/reward profile. Given the generally positive context, a buying opportunity is more compelling than a selling opportunity; especially when considering the bullish-engulfing monthly candle that’s about to ‘confirm’ a reversal by eod.

Pi-cycle indicator

The bitcoin Pi cycle indicator has flashed a buy signal for the first time since August 2022 when BTC exchanged hands at $40,000.

Bitcoin/Dollar Pi Cycle indicator. Last value: $18,400

The Pi Cycle indicator is composed of the 111 day moving average (111-sma) and a 2x multiple of the 350 day moving average (350-sma x2) of Bitcoin’s price. The metric normally shows when Bitcoin becomes significantly overheated (when the shorter moving average reaches the larger MA). However, it can also be used as confluence for positive momentum given its historical precedent and weight in pin-pointing the early stages of bull market cycles.

In fact, this indicator suggests Bitcoin has begun a cyclical bull market (commensurate with its secular trend). The shorter MA currently sits at $18,400 (climbing every day).

Cost-basis

Bitcoin is also above its cost-basis (last value $19,800).

Bitcoin/Dollar realised price. Last value $19,800

The realised price is calculated as the realised cap divided by the total coin supply. It measures the average price weighted by the supply of what the entire market participants paid for their coins.

The on-chain interpretation is ‘support’ when prices trend higher than the cost-basis and ‘resistance’ when prices are below it. Bitcoin could return to ‘test’ its realised price sometime in the future, offering an opportunity to gain exposure to the asset.

FOMC meeting

FOMC meeting notes are set to release on Wednesday (8:00pm CET). And the market is pricing in a nearly 100% chance of a rate hike this month, with an 89% chance of another 0.25% rate hike in March. Data indicates investors expect a significant rate cut in the second half of 2023.

Target rate probabilities for Feb. 1, 2023 Fed meeting

In terms of its immediate effects on the market, the FOMC event will likely cause volatility (whipsaw) more than the exact percentage-rate-hike itself. All eyes are on Jerome Powell’s tone and discourse.

Closing thoughts

Stepping back from the day-to-day grind, it’s worth noting that Bitcoin has effectively taken out 28 weeks of trading activity in three weeks. This is significant in that buyer intent is beyond clear, if there is such a thing. The next two technical ‘confirmations’ are a monthly close above $22,000 (imminent), and a reclaim of the 200-weekly exponential moving average, after which an ‘official’ bull market can be declared.

In closing, I’d like to point out that Bitcoin is not just a ‘hedge against inflation’ - it is a demonstrably scarce and incorruptible asset in an ocean of fraud, lies and deception. FTX, medical tyranny, CBDC’s, the ongoing escalation of the Russia-NATO conflict are unfortunately linked in this regard, and defunding bad players through bitcoin is a proposition that has only now come into existence.

Given enough time, Bitcoin will likely topple entire governments or force change of sorts. This bear market is not like others — and betrayal is not soon forgotten, especially when it occurs in multiple industries (public, private, non-governmental) at the same time. Litecoin is in the same boat as Bitcoin.

Cheers.

Latest happenings

Listening material

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

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Chris on Crypto

Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.