The market rhythm of Bitcoin has never been linear: it alternates between surges, euphoria, and corrections. Over the years, analysts have constantly sought tools to capture this rhythm, one widely discussed indicator for 'precisely predicting tops' is the Pi cycle top indicator. However, in today's more mature market environment, is this classic tool still effective?
Key points
Identifying rhythm: The Pi cycle top often captures moments when short-term euphoria in price exceeds long-term trends.
Understanding evolution: The cycle peaks of Bitcoin are gradually moderating; past extreme peaks may no longer be the norm.
Combining signals: A single indicator is not reliable; it needs to be combined with on-chain data, the macro environment, and market sentiment.
Staying flexible: Besides sharp peaks, there may also be patterns of steady rise or prolonged fluctuations in the future.
Logic of the Pi cycle top
This indicator is based on two moving averages: the 111-day moving average and the 350-day moving average (multiplied by 2). Historically, when the short-term moving average crosses above the long-term moving average, it often indicates that the market is entering an extremely euphoric phase, corresponding to a major top in Bitcoin:
2013: The first surge, the indicator accurately peaked.
2017: Bitcoin approached $20,000, and the crossover occurred right at that moment.
2021: The crossover coincided with an on-chain peak, followed by a long correction.
The short-term moving average represents the accelerated emotions of traders, while the long-term moving average reflects market structure. When they converge, it often signifies that 'FOMO' emotions have far exceeded reasonable levels.
Limitations and challenges
Today, the 111-day moving average is around $110,000, and the 350-day × 2 is at $187,000. To trigger a crossover, Bitcoin must approach or even exceed $200,000. Considering the market's gradual maturation, such 'vertical surges' may not occur again. The bigger issue is that the Pi cycle top is a binary signal of 'either triggers or does not trigger', lacking flexibility.
Improved version: Pi cycle top oscillation indicator
To address the shortcomings, researchers proposed an 'oscillation version'. It does not wait for a crossover but measures the gap between the two moving averages and translates it into continuous values:
When the two moving averages are close, the background turns orange, indicating top risk.
When the gap widens, the background turns green, corresponding to bottom areas.
The oscillation readings of previous peaks are also gradually declining:
2013/14 cycle: 130
2017 cycle: 110
2021 cycle: 100
This means: the extreme euphoria of Bitcoin is gradually weakening. The current reading is only about 37, far below historical top levels, indicating that the market has not yet entered a final frenzy stage. For investors, when the reading gradually approaches above 75, it may be a suitable time to gradually take profits.
Looking ahead
Although the oscillation indicator is more practical than the original version, it still relies on the traditional model of 'sharp surges'. If this cycle is not driven by FOMO-induced surges but rather by institutional funds leading to a 'stepwise slow rise', then this tool may fail. Therefore, investors need to combine on-chain indicators, capital flows, and the macro environment to avoid over-reliance on a single indicator.
In summary: history does not simply repeat itself, but it often rhymes. In markets like Bitcoin, emotion-driven peaks can arrive at any moment, but the way they manifest and their rhythm may be completely different from the past.