Original Title: "On-Chain Data Detailed Analysis: You Might Need to Be Prepared to Exit at Any Time"

Original author: Mr. Begg, on-chain data analyst

TLDR

• This article will elaborate on the basis for personal judgment of approaching the top from the perspective of on-chain data.

• Historical cycle peaks have always had "2 distinct distribution phases"; we are currently in the 2nd phase

• Explain the principle of market peaks: The distribution of low-cost chips is completed

• Determine if the top will appear in Q1

• From a trader's perspective, explain how to observe and dynamically adjust trading models.

1. The underlying principles of the market top formation of $BTC

In each round of the bear market phase, a large number of participants silently accumulate chips, commonly known as "buying in". When market sentiment reaches an extreme low point, trading becomes quiet, and prices even fall below the average cost of long-term holders, it is the moment of hitting the bottom. Related reading resources: "On-chain Data Academy (6): A brand new, Ark-participated research on the magical pricing methodology of BTC (I)"

As the bull market kicks off and prices soar, the chips accumulated during the bear market will start to be distributed continuously. When the distribution ends, the remaining chips in the market belong to participants who bought at "relatively high prices." Since these participants have a higher cost basis, if the subsequent prices do not continue to rise, or even just maintain a wide fluctuation, it will increase their holding pressure significantly, greatly raising the possibility of selling (in comparison to relatively low-cost chips). Ultimately, once some high-priced chips start to panic sell, leading to a price drop, it will further trigger other high-cost chips to sell, causing a chain reaction that signals the end of the bull market.

Note: This is more evident in the $BTC market, as most companies in the stock market have fundamentals to support them, and stock prices are calculated based on the discount rate, which translates the company's future cash flows into current value.

2. Major tops are always accompanied by 2 distributions

After understanding the principles of market peaks, readers can take a look at the figure below:

This is a top signal model designed by me based on on-chain data, and it will also be included in the weekly top escape report. As can be seen, before each round of cycles historically peaks, there will be 2 signals.

Simply sticking to the old ways of "because it has always been this way" is certainly not acceptable.

The fundamental reason for the occurrence of 2 distributions logically is:

· The first distribution represents the price beginning to soar, low-cost chips start to be offloaded

· After the first distribution ends, the price begins to pull back, attracting a large amount of bottom-buying orders.

· Market sentiment continues to drive to extreme highs, with large amounts of buying pressure, absorbing the distribution of remaining low-cost chips.

Due to the massive volume of low-cost chips, it is usually impossible to complete the first distribution, so a second distribution is required through the enormous buying pressure brought in by bullish market sentiment.

3. What happened in this bull market cycle?

Everyone can take another look at the top model signal chart above, and you should find that this cycle has not yet produced a top signal.

However, when I was designing the model and studying market dynamics, I actually discovered some "clues." I marked the areas where I found the clues with translucent red on the right side of the diagram. Next, I will explain to the readers what warning signals I observed:

1.Realized Profit

The above image is the Realized Profit chart, and I have marked the "areas with clues" in the same way as in the first image with translucent red.

It can be seen that in March and April 2024, when the price surged over 70k, there was a massive profit-taking (first distribution). At the end of last year, when the price broke through the 100k mark, a large amount appeared in Realized Profit again (second distribution). Therefore, from the perspective of Realized Profit, there have actually been 2 distributions.

Related reading resources: "On-chain Data School (3): Have the bottom-accumulating manipulators taken their profits?"

2.AVIV Heatmap

The AVIV Heatmap is also content that will be included in the weekly report, the main purpose is to observe whether the market is currently in a "overheated" stage. The AVIV value can be temporarily understood as a "more precise" MVRV. I will write a separate article in the future to explain the detailed principles.

As shown in the figure, I have also marked the "clue area", which is around March and April of this year. It can be seen that there was a period of "overheating" on the AVIV Heatmap at that time, and after about half a year of wide fluctuations, the overheating state was resolved; then, when the price broke through the 100,000 mark, AVIV showed overheating again.

Therefore, from AVIV's perspective, it still indicates that we are currently in the "second distribution" phase.

3.Cointime Price Deviation Top Model

I wrote an article on December 27th last year, explaining how I designed a top screening model using Cointime Price:

The current state of the model is shown in the above figure, where we can see: every historical periodic top corresponds to two distinct peaks (two distributions), which corroborates the concept described in the second paragraph of this article.

In this cycle, the first obvious peak (the clue area) has already emerged, and we are currently at the second peak (where signs of a turn have already appeared).

4. Why does the top signal model in Figure 1 not have jump signals?

Through this article, I would like to briefly explain this issue to the readers. Due to the numerous parameters included in the top signal model, these parameters are set subjectively by me. In my research and design, I have intentionally relaxed the triggering conditions of the signals, but it still did not produce signals during the distribution in March and April of last year.

However, this is not a big deal because, as a trader, it is impossible to rely on a single model or signal when analyzing the market. Especially for models that contain subjective parameters, I only use them as a reference and will still analyze various indicators and data comprehensively in practical judgment.

Lastly, let me add: "This bull market is a great opportunity to test various top signals in the market, because most top signals are just simple cases of seeking a sword in a boat, with a very high probability of failure."

V. Conclusion

This article is somewhat lengthy, and I hope you all understand. Thank you very much to the readers who have patiently read this far, and I hope this article is helpful to you.

In addition to the content mentioned in this article, the previously written RUP top signal is also a highly representative indication: "On-chain Data Academy (Ten): Market Barometer RUPL (II) - The Strongest Top Signal & Detailed Analysis of Historical Cycle Tops"

And after the subsequent price drop, I also urgently updated an article titled "Right-Side Top Escape Strategy" based on the content written at the RUP top signal.

If you agree with my point of view, then at this moment, perhaps you should be prepared to escape the top at any time...

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