Mayer Multiple: a metric to study the price of bitcoin
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Mayer Multiple: a metric to study the price of bitcoin

By Matteo Gatti - 31 May 2019

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While the stochastic oscillator is a technical indicator very used also in the world of the classical trading the Mayer Multiple is a metric conceived expressly in order to estimate the course of bitcoin. The name derives from its inventor Trace Mayer.

This metric allows us to have an idea about the trend of bitcoin: is it time to buy or not?

Mayer Multiple: simple metric to evaluate the bitcoin trend

Knowing exactly when you have reached the bottom and the price is about to rise is in fact impossible. The indicators are designed to give traders an idea of how the market is performing. That said, identifying speculative bubbles and identifying the end of a bearish period is easier with the Mayer Multiple.

Mayer defines multiple as such:

“It is the multiple of the current bitcoin price over the 200-day moving average”.

Mayer Multiple Formula: Bitcoin (market price) / 200 day MA value = Mayer Multiple.

In technical analysis, there is a bullish period when the price of an asset is above the long-term moving average (MA), while if the price is below that indicator, there is a bearish phase. If the price is well above the MA then you are in an overbought phase: the asset is overvalued. The opposite is true if the price is far below the indicator.

Mayer’s formula essentially quantifies the gap between the bitcoin price and the 200-MA. If the formula assumes a value inferior to 1 then we are below the 200-MA, if it assumes a value superior to 1 then we are above the 200-MA. So we are in a bullish phase when its value is higher than 1 and in a bearish phase when it is lower than 1.

Any value above 2.4 has given rise to a speculative bubble in the history of BTC. Conducting simulations on the bitcoin trend showed that it is convenient to accumulate BTC as long as the Mayer indicator assumes a value below 2.4. The metric, in history, has never gone below 0.237 while the highest point was touched around 14 in June 2011. At the end of 2017, when bitcoin touched its ATH at $20,000, the value of the metric was around 3.5.

To date, the value of Mayer’s formula is 1.79, far from the purchase threshold (2.4). Mayer’s formula, therefore, says that it is still a good time to buy bitcoin. On the official website, it is possible to consult in real time the value of the indicator.

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