How to Take Profits at Bitcoin Cycle PeaksLearn how on-chain metrics and sentiment tools can help you time Bitcoin cycle peaks effectively.
Discussing when and how to sell Bitcoin can be controversial, but if you’re planning to take profits this cycle, it’s essential to do it strategically. While holding Bitcoin indefinitely is an option for some, many investors aim to capture gains, cover living expenses, or reinvest at lower prices. Historical trends show that Bitcoin often experiences drawdowns of 70-80%, providing opportunities to reaccumulate at reduced valuations. Why Selling Isn’t Always TabooWhile some, like Michael Saylor, advocate never selling Bitcoin, this stance doesn’t always suit individual investors. For those not managing billions, taking partial profits can offer flexibility and peace of mind. If Bitcoin peaks at, say, $250,000 and faces a fairly conservative 60% correction, it would revisit $100,000, creating a chance to reenter at lower levels than we’ve already seen.
Figure 1: There’s a good chance you’ll be able to scale back in at lower prices than today. The goal isn’t to sell everything but to strategically scale out of positions, maximizing returns and managing risks. Achieving this requires pragmatic, data-driven decisions, not emotional reactions. But again, if you never want to sell, then don’t! Do whatever works best for you. Key Timing ToolsThis Active Address Sentiment Indicator (AASI) compares changes in network activity to Bitcoin’s price movement. It measures deviations between price (orange line) and network activity, shown by green and red deviation bands.
Figure 2: AASI has historically worked well as a top timing indicator. For example, during the 2021 bull run, signals emerged when the price change exceeded the red band. Sell signals appeared at $40,000, $52,000, $58,000, and $63,000. Each provided an opportunity to scale out as the market overheated. The Fear and Greed Index is a simple yet effective sentiment tool that quantifies market euphoria or panic. Values above 90 suggest extreme greed, often preceding corrections, such as in 2021, when Bitcoin rallied from $3,000 to $14,000, the index hit 95, signaling a local peak.
Figure 3: Fear & Greed is simple but has historically been effective.
Own a piece of the bitcoin companies you love with as little as $100. The Short-Term Holder MVRV measures the average unrealized profit or loss of new market participants by comparing their cost basis to current prices. Around 33% profit levels often mark reversals and local intracycle peaks, and when unrealized profits exceed around 66%, markets are often overheated and may be close to major cycle peaks.
Figure 4: Short Term Holder MVRV has predictable turning points. The Bitcoin Funding Rates reflect the premiums traders pay to maintain leverage positions in futures markets. Extremely high funding rates suggest excessive bullishness, often preceding corrections. Like most metrics, we can see that counter-trading an overly euphoric majority usually provides an edge.
Figure 5: Incredibly high funding rates cannot be sustained and often mark turning points. The Crosby Ratio is a momentum-based indicator that highlights overheated conditions. When the ratio enters the red zone on the daily chart, or even lower timeframes if you use our TradingView version of the indicator, market turning points have typically occurred. When these signals occur in confluence with other top-marking metrics, it solidifies the probability of a larger-scale prediction.
Figure 6: Crosby Ratio outlines overextended upside price action. ConclusionTiming the exact top is virtually impossible, and no single metric or strategy is foolproof. Combine multiple indicators for confluence and avoid selling your entire position at once. Instead, scale out in increments as key indicators signal overheated conditions, and consider setting trailing stops tied to key levels or a percentage of price movement to capture additional gains if price rallies even higher. For a more in-depth look into this topic, check out a recent YouTube video here:  Matt Lead Analyst Bitcoin Magazine Pro. Bitcoin Magazine Pro
For more detailed Bitcoin analysis and to access advanced features like live charts, personalized indicator alerts, and in-depth industry reports, check out Bitcoin Magazine Pro. Make Smarter Decisions About Bitcoin. Join millions of investors who get clarity about Bitcoin using data analytics you can't get anywhere else. We don't just provide data for data's sake, we provide the metrics and tools that really matter. So you get to supercharge your insights, not your workload. Take the next step in your Bitcoin investing journey:
Invest wisely, stay informed, and let data drive your decisions. Thank you for reading, and here’s to your future success in the Bitcoin market! Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Always do your own research before making any investment decisions. We sincerely appreciate your support and hope you found this content valuable. Please leave a like and let us know your thoughts in the comments section; we always welcome feedback from our audience!
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Friday, January 31, 2025
How to Take Profits at Bitcoin Cycle Peaks
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