How to use the Mayer Multiple to analyze Bitcoin price in a historical context

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network of computers. It has no central authority or intermediary and can be sent and received by anyone with an internet connection. Bitcoin is also scarce, as there can only be 21 million bitcoins in existence.

However, Bitcoin is also volatile, as its price can fluctuate significantly in a short period of time. This makes it challenging for investors and traders to determine when Bitcoin is overvalued or undervalued in relation to its long-term trend.

One of the tools that can help with this analysis is the Mayer Multiple, a technical indicator that compares the current price of Bitcoin to its 200-day moving average. The 200-day moving average is a simple way to measure the average price of Bitcoin over the past 200 days, which represents its long-term trend.

The Mayer Multiple was created by Trace Mayer, an early Bitcoin investor and advocate, who suggested that a Mayer Multiple of 2.4 or higher indicates that Bitcoin may be in a bubble and overbought, while a Mayer Multiple below 2.4 indicates that Bitcoin may be a good buy opportunity and undervalued.

The higher the Mayer Multiple, the more expensive Bitcoin is relative to its long-term trend. The lower the Mayer Multiple, the cheaper Bitcoin is relative to its long-term trend. The average Mayer Multiple since the creation of Bitcoin is 1.36. This means that, on average, Bitcoin trades at 36% above its 200-day moving average.

To illustrate how the Mayer Multiple works, let's look at some historical examples.

• The first time the Mayer Multiple was close to 0.5 was on January 14, 2015, when it was 0.51 and the closing price of Bitcoin was $177.28. This was a time when Bitcoin was experiencing a bear market after reaching an all-time high of $1,163.00 on November 29, 2013. A Mayer Multiple of 0.51 meant that Bitcoin was trading at half of its long-term average price and may have been undervalued.
• The first time the Mayer Multiple was close to 2.5 was on December 16, 2017, when it was 2.49 and the closing price of Bitcoin was $19,343.04. This was a time when Bitcoin was experiencing a bull market and reached its highest peak at that time. A Mayer Multiple of 2.49 meant that Bitcoin was trading at two and a half times its long-term average price and may have been overvalued.
• The second time the Mayer Multiple was close to 0.5 was on December 15, 2018, when it was 0.51 and the closing price of Bitcoin was $3,229.87. This was another time when Bitcoin was experiencing a bear market after reaching a lower high of $17,252.17 on January 6, 2018. A Mayer Multiple of 0.51 meant that Bitcoin was trading at half of its long-term average price and may have been undervalued again.
• The second time the Mayer Multiple was close to 2.5 was on February 21, 2021, when it was 2.48 and the closing price of Bitcoin was $57,505.08. This was another time when Bitcoin was experiencing a bull market and reached a new all-time high of $58,332.36 on February 21, 2021. A Mayer Multiple of 2.48 meant that Bitcoin was trading at two and a half times its long-term average price and may have been overvalued again.
• The third time the Mayer Multiple was close to 0.5 was on July 20, 2021, when it was 0.50 and the closing price of Bitcoin was $29,608.26. This was a time when Bitcoin was experiencing a correction after reaching another all-time high of $64,863.10 on April 14, 2021. A Mayer Multiple of 0.50 meant that Bitcoin was trading at half of its long-term average price and may have been undervalued again.
• As of April 6, 2023, the Mayer Multiple is 0.98 and the closing price of Bitcoin is $27,519.35. This means that Bitcoin is trading below its long-term average price and may be undervalued according to the Mayer Multiple indicator.

Now let's imagine a hypothetical scenario where an investor started with $1000 and followed the rules of buying when the Mayer Multiple was 0.5 and selling when it was 2.5.

Here are the steps they would have followed:

• They looked at the daily data from January 1, 2012 to April 6, 2023 and found the dates when the Mayer Multiple was closest to 0.5 or 2.5.
• They assumed that they bought or sold Bitcoin at the closing price of that day.
• They ignored any transaction fees or taxes that may apply in reality.
• They rounded the numbers to two decimal places for simplicity.

Here are the results:

• The first time the Mayer Multiple was close to 0.5 was on January 14, 2015, when it was 0.51 and the closing price of Bitcoin was $177.28. They bought 5.64 Bitcoins with $1000.
• The first time the Mayer Multiple was close to 2.5 was on December 16, 2017, when it was 2.49 and the closing price of Bitcoin was $19,343.04. They sold 5.64 Bitcoins for $109,154.67.
• The second time the Mayer Multiple was close to 0.5 was on December 15, 2018, when it was 0.51 and the closing price of Bitcoin was $3,229.87. They bought 33.79 Bitcoins with $109,154.67.
• The second time the Mayer Multiple was close to 2.5 was on February 21, 2021, when it was 2.48 and the closing price of Bitcoin was $57,505.08. They sold 33.79 Bitcoins for $1,943,859.63.
• The third time the Mayer Multiple was close to 0.5 was on July 20, 2021, when it was 0.50 and the closing price of Bitcoin was $29,608.26. They bought 65.66 Bitcoins with $1,943,859.63.
• As of April 6, 2023, the Mayer Multiple is 0.98 and the closing price of Bitcoin is $27,519.35. They still hold 65.66 Bitcoins worth $1,806,216.81.

Therefore, if they followed these rules strictly, they would have turned $1000 into $1,806,216.81 in about eight years and four months, which is a remarkable return of over 180000%.

However, this is a hypothetical scenario based on historical data and does not account for many real-world factors that may affect the investment outcome. It also assumes that they had perfect timing and discipline to follow these rules without any deviation or emotion.

Therefore, this calculation should not be taken as financial advice or a guarantee of future results. Investing in Bitcoin or any other cryptocurrency is risky and volatile and requires careful research and analysis before making any decisions.

If you want to learn more about the Mayer Multiple, you can check out these sources:

• [#1 Mayer Multiple Indicator Chart (Updated Daily) - Buy Bitcoin Online]
• [Bitcoin Mayer Multiple By BuyBitcoinWorldWide]
• [Bitcoin Mayer Multiple Explained [Simply] - The Money Mongers]
• [Mayer Multiple - Newhedge - Bitrawr]

I hope you enjoyed this blog post and learned something new about the Mayer Multiple and Bitcoin. If you have any questions or feedback, please leave a comment below. Thank you for reading! 😊