Acknowledgment: Derek Pennings came up with “The Entry Indicator.” I helped him with putting the thought process in writing. You can find him on Twitter @PenningsDerek.
Not Again
It happened. Again. Price dropped more than 50% from its all-time high. During times like these, people wonder whether the bottom is in or not. Nobody wants to sell the bottom. And nobody likes to buy a dip that keeps on dipping either.
There are a lot of indicators. Some of which we call “on-chain” indicators and some are technical price indicators. For example, the relative strength index (RSI) on the daily time frame. When it hits 20 or lower, then it’s really something. Or what about Fibonacci levels? All great indicators to get some sense of price action. But does it make it a great entry indicator? It may be useful, but it’s always relative to the previous price action, which isn’t a fundamental threshold. It’s technical.
Realized Price
So, which indicator has a fundamental threshold? We like to watch the realized price closely. In an earlier written article[1], we explain how we look at the bitcoin (market) price with the realized price as an anchor. When the price of bitcoin goes below the realized price, it means that, on average, bitcoin HODLers are at a loss. Early investors may still be in profit, but most investors are at a loss.
On January 31, 2022, the realized price was around $23,900. In the history of bitcoin, it rarely happens that the market price reaches this level or even goes below it. But even when it happens, it doesn’t exactly mark the bottom. Yes, it’s a darn good place to stack some extra sats, but will the price stop from dropping at this level? On January 14, 2015, it
