<p>More meaningful than discussing the exit price of BTC is learning to identify turning points in large cycles.</p>

Original author: bonnazhu, Nothing Research

Editor's note: As April progresses, the Bitcoin halving is drawing closer. Recently, while the price of gold has reached historic highs and silver and copper prices have surged, the BTC, known for its strong safe-haven properties, has been hovering around $70,000. (Reference: "Bull Market in Geopolitical Crisis: Why is BTC Hesitating Despite Multiple Positive Factors?"). Perhaps we are still in the early stages of this bull market. Member of the Nothing Research team, bonnazhu, shared on X how to identify turning points in large cycles. The full article reprinted by BlockBeats is as follows:

Identifying turning points in large cycles is more meaningful than discussing how long the bull market can last or the exit price of $BTC and $ETH. Although the ways to judge turning points may vary, there is only one truth to be tested, which is to be able to confirm on the candlestick chart. If you judge the turning point too early or too late compared to the market, you will suffer losses. In my opinion, the most effective way to verify, and even directly judge, turning points without error is only through: 1) RSI divergence; 2) Moving average alignment.

TLDR:

Whether it's $BTC or $ETH, although the RSI at the weekly level has been in overbought territory for some time (which is common in a bull market), there has been no divergence at the weekly level. The daily and weekly moving averages are in a bullish alignment, showing no signs of a reversal. Most prices and trades are running above short-term moving averages, with no retracement touching the long-term moving averages, not even breaking the 100-day moving average at the daily level. Clearly, the market still has a way to go, and although there will be fluctuations and pullbacks, what matters is whether you can abandon preconceived notions and expectations of target prices when the real turning point arrives, and gracefully acknowledge the objective facts.

More on RSI and moving averages:

1) RSI Divergence

It mainly refers to the phenomenon where the price reaches a new high, but the RSI does not reach a new high and even shows a downturn, known as "top divergence"; or the price reaches a new low, but the RSI does not reach a new low and even shows an upward trend, known as "bottom divergence."

The characteristic of this indicator is that it is "leading" in the market. Often, when the signal appears, the price has not yet reflected it, and many times the price continues to rise or fall. However, the power of this indicator also lies in the fact that the longer the divergence lasts and the more times it occurs, the stronger the reversal signal.

Regarding large cycles, weekly RSI divergence is more significant because this signal appears relatively less frequently, basically 1-2 times, so there is less interference. On the other hand, daily RSI divergence appears more frequently, often corresponding to temporary retracements rather than reversals. Taking BTC as an example:

In practice, it is found that in a cycle, top divergences often occur more than once, and there have been cases of repeated divergences in the past, while bottom divergences often form at once. I personally speculate that this seems to have some close connection with human greed and fear: in top divergences, even if there are signs of overbuying in the market, due to the generally optimistic attitude of participants, they may overlook risks and continue to push prices higher. Conversely, during the formation of bottoms, due to the prevalent pessimism in the market, investors tend to act conservatively or lie flat out, which reduces market activity, giving smart money the opportunity to intervene and drive a reversal, making it easier to form at once. However, as market funds become more mature and rational, the situation of repeated top divergences will become less and less, so this indicator remains a core reference for verifying turning points in large cycles.

2) Moving Average Alignment

It mainly refers to the phenomenon where short-term moving averages (5-day moving average) are above medium-term moving averages (25-day and 50-day moving averages), and medium-term moving averages are also above long-term moving averages (100-day and 200-day moving averages), with the overall trend of moving averages pointing upwards, known as "bullish alignment"; or the short-term moving averages (5-day moving average) are below medium-term moving averages (25-day and 50-day moving averages), and medium-term moving averages are also below long-term moving averages (100-day and 200-day moving averages), with the overall trend of moving averages pointing downwards, known as "bearish alignment."

The characteristic of this indicator is that it "lags" behind the market. Often, when a bearish alignment turns into a bullish alignment, or vice versa, some time has already passed since the top or bottom. Therefore, we pay more attention to turning points where the alignment pattern may begin to change. This turning point is often described using "golden cross" or "death cross," where the "golden cross" is when the short-term moving average crosses above the medium-term moving average, and the "death cross" is when the short-term moving average crosses below the medium-term moving average.

Due to the "lagging" nature of moving average patterns, it is recommended to mutually verify the weekly and daily charts. Taking BTC as an example:

In practice, it is actually a bull market with long rises and short declines. In a true bear market where a complete bearish alignment forms and continues to decline, it actually only lasts for a few months. In addition, although "golden crosses" and "death crosses" may occur earlier than the confirmation of moving average patterns, they appear more frequently and cause more disturbances. However, these disturbances actually correspond to the repeated game between the long and short forces of the market, as well as multiple selling and buying points in the bull and bear cycles. It is impossible to accurately time the top and bottom, so try more times.

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