Mayer Multiple Bitcoin Update: BTC Likely Oversold

The Mayer Multiple is a simple but sleek indicator created by early Bitcoin entrepreneur Trace Mayer. It measures the current price of Bitcoin against a long-term historical price range of BTC, the 200-day moving average. Like many other indicators, the Mayer Multiple highlights when BTC may be under or over-sold, in the context of longer time frames.

The Mayer Multiple is calculated by dividing the current price of BTC by the average price of BTC over the last 200 days. The current Mayer Multiple is 0.513, which means that the current price of BTC is less than half of the moving average price of BTC. Historically, the Mayer Multiple dropping below or close to 0.5 is a strong signal for a cycle bottom.Source: bitrawr.com

In the past when this number was hit, it preceded extended price run-ups. In 2012, 2015, 2019, 2020 and in 2021 this is what occurred. The basis of the validity of the Mayer Multiple is that a mean reversion effect may occur. An alignment between the short-term price and the long-term price pattern. The 200-day moving average has historically been a popular time frame for Bitcoin trend assessments because it has shown an uncanny ability to be the range of crypto bull and bear cycles.

In some cases, such as in 2014, after the Mayer Multiple hit a low the price did not immediately begin reversing upwards. The sharp isolated downward candle in 2014, was driven by the flash crash of the BTC-e. The shock of the event affected investor sentiment for some time and delayed the return of bullish momentum to the markets.

This year Bitcoin markets have not experienced a flash crash as they did in 2014 but a more drawn-out period of selling pressure. The similarity between the two time periods, however, is that the selling occurred because of an infrastructure failure. The selling in 2022 has been driven by a mass deleveraging event where numerous crypto lending firms, and their counterparties, including Terra, Anchor, Three Arrows Capital, and Celsius have all failed in quick succession.Source: bravenewcoin.com

Like in 2014, it may take some time for confidence to return to markets this time around, because a key infrastructure piece of the crypto industry that drove value through the market for much of 2021 has been proven to be inefficient.Source: Alternative.me

While the Mayer Multiple for Bitcoin price currently sits around historical cycle lows, the crypto fear and greed index suggests that the crypto market is still in a state of ‘extreme fear’. Although the price of BTC has now broken out above $21,000, a bleak macro economic situation will continue to be a factor for why sentiment may remain oppressed in the short term.