Many crypto enthusiasts, especially fans of technical analysis, have heard of the Pi Cycle Top indicator, which has 'magically' predicted the peaks of several previous bull markets. However, few know that there is also its opposite, Pi Cycle Bottom, which also shows results in an attempt to estimate the bottom of bear markets.
But before we take a closer look at the Pi Cycle Bottom, let’s remind ourselves why its bullish counterpart gained so much popularity.
Historical Performance of the Pi Cycle Top
The indicator is based on the relationship between the double 350-day moving average (DMA) and the 111-day DMA. The indicator signaled on April 12, 2021, and just two days later, Bitcoin reached a peak of $64,000 .
This high accuracy of the Pi Cycle Top was not an exception, as the indicator was very effective in previous cycles. All 3 historical peaks of previous bull markets coincided with a signal that 'flashed' no more than 5 days before or after the peak.
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The only peak during which the Pi Cycle Top was not signaled is the most recent and current peak. On November 10, 2021, when Bitcoin reached $69,000, the indicator did not generate a signal. At that time, it was interpreted as a sign that the second wave of the bull market was not yet over. Today we know that the indicator failed in this case.
Pi Cycle Bottom and the End of the Bear Market
The Pi Cycle Bottom is the opposite of the Pi Cycle Top. The bearish version is the relationship between the 471 SMA and the 150 EMA. Moreover, the former is multiplied by a factor of 0.745. Not a very elegant construction, but historically very effective.
As it turns out, the Pi Cycle Bottom indicator could be successfully used to estimate the absolute bottom of the two previous bear markets.
The first time the 150 EMA fell below the 471 SMA was on January 16, 2015. This happened just two days after the absolute bottom when Bitcoin traded for $152.
The second time the Pi Cycle Bottom generated the same signal was on December 16, 2018. This occurred just a day after the absolute bottom of the previous bear market at $3,122.
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Currently, we are approaching the third signal in history.
Is the End of the Long-Term Decline in Sight?
If the relationship between the intersection of the two moving averages and the price bottom repeats in this cycle, Bitcoin could soon hit the bottom. Currently, the 150 EMA has begun a sharp decline characteristic of the recent capitulation phase. A crossover is likely in the coming days.
Crypto market analyst TheRealPlanC posted on Twitter his own prediction of the crossover date and reaching the hypothetical bottom. Based on the trajectory of the two curves, he estimated that the intersection would occur on July 9, 2022.
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If this were to happen, then exactly 11 days later, the Pi Cycle Bottom would generate a signal that very accurately indicated the price bottom in the previous two iterations.
Another analyst, el_crypto_prof, went a step further by combining the potential signal from the Pi Cycle Bottom with fractal analysis of previous cycles. In his opinion, if a potential Bitcoin bottom were to occur in the near future, it would fit well into the analogies between previous cycles.
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In the above chart, we can see that for the entire period since April 2021, the analyst included the correction phase after the peak marked in red. It also includes the most recent peak of $69,000 achieved on November 10. Although a higher price was technically reached then, many technical and on-chain indicators suggest that it was already a bear market.
Perhaps that was also the reason why the Pi Cycle Top did not generate the corresponding signal. If this is true and the correction in the crypto market has lasted for more than a year, then we can indeed expect the end of the long-term decline soon. The Pi Cycle Bottom indicator is just one of the scenarios and numerous indicators that technical analysts take into account.
