CoinMarketCap Academy dives into Pi Cycle Top Indicator, a simple trading indicator that seems to have predicted previous bull cycle tops. Let's see if these claims are correct!
While there are many different indicators and tools to use in your cryptocurrency journey, only a few have managed to predict historical Bitcoin cycle highs and lows with an accuracy of 3 days. In today’s article, we discuss the Pi Cycle Top Indicator, which has managed to do it.
Yes, you read that right. The Pi Cycle Top Indicator has managed to predict Bitcoin bull market cycle tops with ridiculous accuracy in the past. So what is this indicator, how does it work, and can we use it to our advantage? Let’s dive in!
What Is the Pi Cycle Top Indicator?
The Pi Cycle Top Indicator is an incredibly simple, but effective combination of technical indicators. Even though the strategy is based merely on a combination of two moving averages, it has managed to predict four different cycle tops with amazing accuracy. With this track record, many Bitcoin investors look to the Pi Cycle Top Indicator to predict the next Bitcoin market cycle high.
First published by LookIntoBitcoin founder, Philip Swift, the Pi Cycle Top indicator can be found in the toolbox of many Bitcoin investors. But how does it work?
How Is the Pi Cycle Top Indicator Calculated?
To generate Pi Cycle Top signals, Philip Swift put together a combination of two daily moving averages: the 111-day moving average and a 2x multiplication of the 350-day moving average.
Both moving averages are long-term indicators, but the 111-day moving average is more responsive to price than its 350-day counterpart, as it uses far fewer days to compute an average.
Under normal conditions, the 2x multiplication of a 350-day moving average should be far above the 111-day moving average – and for most of Bitcoin history, it has. The rare moments, where that 111-day moving average crosses above its multiplied 350-day counterpart, trigger the Pi Cycle Top signal.
In the image above, the white line indicates a 111-day moving average. Whenever it crossed above the 350-day average (even if briefly), the market marked the cycle top. Looking back, that signal has been an accurate indicator of Bitcoin cycle highs.
Fun Fact: When you divide 350 by 111, is 3.153 – really close to the mathematical Pi number (3.142). What a name, right?
Does the Pi Cycle Top Indicator Really Work?
As discussed, the Pi Cycle Top Indicator has managed to accurately time the top of the previous market cycles. However, it is worth noting that the indicator was designed only in April of 2019, which is after the first three signals took place.
Only the most recent signal was printed after the indicator was published, and Bitcoin still managed to push higher after that, although the market did pull back over 50% following the signal. Critics argue the model has been curve-fitted, and that the most recent signal coinciding with the market top is a coincidence. At this point, it is hard to tell if they are right or not – a new market cycle will have to find its highs before we’ll know for sure.
Closing Thoughts
All in all, the Pi Cycle Top Indicator is an interesting indicator to observe, but it needs time to prove its worth. As with any indicator, it is unwise to base trading decisions purely on the signals provided by that indicator. Instead, perform your analysis with multiple tools, and act on those conclusions when they are aligned.
Writer’s Disclaimer: This article is based on my limited knowledge and experience. It has been written for educational purposes. It should not be construed as advice in any shape or form. Please do your own research.
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