The Pi Cycle Top Indicator has accurately predicted its fair share of bitcoin tops in the past. The last four times it flashed a “top signal,” bitcoin crashed between 52% and 86%. So in this guide, I’ll explain how the Pi Cycle Top Indicator works, and how to use it to help you potentially spot bitcoin’s next peak.
Contents
Video version of this guide
Exactly how accurate is the Pi Cycle Top Indicator?
The Pi Cycle Top Indicator has had four bitcoin top signals since 2013. Each signal occurred within a few days of a major peak in bitcoin’s price. The chart below shows how each one panned out.
The first top signal was on April 5th, 2013, with bitcoin dropping 65.50% over the next 11 days. The bitcoin price almost doubled in the first four days after the signal, but that rally wasn’t sustainable. Personally, I wouldn’t put too much weight on the 2013 signal, as bitcoin’s total market size was just a few billion dollars back then. That made bitcoin much more volatile because it took much less trading volume to move the price.
The second bitcoin top signal was triggered on December 3rd, 2013, just one day before bitcoin’s actual peak for the cycle. Over the next 623 days, bitcoin’s price dropped by 86.11%.
The third top signal happened on December 16th, 2017 – again, one day before Bitcoin’s bull market top for that cycle. When the signal flashed, bitcoin sunk 84.03% over 364 days.
Finally, the fourth bitcoin top signal was on April 12th, 2021. Two days later, bitcoin’s price peaked at just under $65,000. From April 12th until June 22nd (71 days), bitcoin dropped by 52.94%. This percentage drop wasn’t as big as the others, but bitcoin’s market size was a lot bigger by then (over a trillion dollars).
Given the above stats, I’ll definitely take the Pi Cycle Top indicator seriously the next time it fires off! Just keep in mind that bitcoin has also peaked without a signal. That happened on June 26th, 2019 (71.98% drop over 261 days) and November 10th, 2021 (77.57% down over 376 days). You can see these in yellow in the chart.
How does the Pi Cycle Top Indicator work?
The Pi Cycle Top Indicator was created by Philip Swift, a crypto analyst and founder of the crypto analytics website LookIntoBitcoin.
Here’s how it works. The indicator gives a “top signal” when bitcoin’s 111-day moving average (orange line, chart below) crosses above double the value of its 350-day moving average (green line). Here, a moving average is simply the average of bitcoin’s price of the past X number of days, and it keeps updating each day.
As for why the indicator works, I have three theories, and it might be some combination of them:
The moving average cross shows an extended rally: When the shorter-term moving average crosses above double the value of the longer-term one, it means bitcoin’s rally is very extended – and you should probably expect a pullback.
The mathematics of pi (π): Dividing the Pi Cycle Top’s two moving averages (350 by 111) gives you 3.153 – and the Greek letter pi (π) represents the number 3.142 (to three decimal places). Pi has all kinds of mathematical relationships in nature. For example, pi is the ratio of a circle’s circumference to its diameter, it appears in the calculations of wave patterns, and it even helps describe the shape of rivers. Pi also pops up in various outer space cycles, like moon phases and planet orbits. Maybe that’s why it’s worked for bitcoin cycles, too.
Traders monitor the indicator: The Pi Cycle Top Indicator is well-known among crypto traders and investors. So when it flashes a top signal, many might sell their bitcoin.
Side note: The golden Fibonacci ratio is another mathematical formula that works in the markets. See our Fibonacci Trading guide for the low down on that.
What does the indicator suggest about bitcoin’s next top?
The two moving average lines of the Pi Cycle Top indicator are both sloping upward right now. The orange line is getting closer to the green line, but crossing it might take a while. So if you’re going strictly by the indicator, bitcoin’s cycle hasn’t ended yet – and the bull run probably has further to go.
That said, if you see bitcoin’s price drop below the orange line (111-day moving average) first, you might want to be cautious. That happened a few months after the June 2019 top, and a month after the November 2021 top. Remember from earlier that the moving average cross signal did not identify those two bitcoin price peaks.
On the flip side, if you see bitcoin climb above the green line (double the 350-day moving average), its price could quickly accelerate higher. According to the indicator, that’s usually the final stretch of the bull market – and the most volatile.
Should you use the Pi Cycle Top Indicator in your strategy?
The Pi Cycle Top Indicator has a stellar track record of flashing accurate bitcoin top signals. So, yes, it’s definitely something to consider in your strategy. Just don’t rely on it blindly: bitcoin has a habit of doing the unexpected, after all.
I’d also add that bitcoin is now a much more mature asset than when the last signal fired. There are bitcoin ETFs (exchange-traded funds) now, along with more institutional interest. Institutions understand that retail investors pay close attention to well-known indicators like the Pi Cycle Top. And these big market players might try to use that to their advantage. To understand more about how that works, I recommend our Wyckoff method guide.
If you’d like to use the Pi Cycle Top Indicator, it’s also available on TradingView. Check out our TradingView tutorial to learn how to add indicators like it to your price chart.
Did you get value from this analysis? Then sign up below to get more of it in your inbox (all free).
Key insights
- The Bitcoin Pi Cycle Top Indicator has an excellent track record of predicting major bitcoin crashes within a few days of a top signal flashing.
- The indicator flashes a “top signal” when bitcoin’s 111-day moving average crosses above double the value of its 350-day moving average.
- Be cautious if the top signal fires. But understand that bitcoin’s had two 70%-plus corrections since 2019 without the signal going off.
