The Mayer Multiple is a tool developed by bitcoin investor and podcast host Trace Mayer, where the metric divides the current price of bitcoin against its 200-day moving average value. As a long-term indicator of oversold or overbought conditions, this metric can identify when the price of bitcoin is in ‘normal’ or ‘abnormal’ territory.
In technical analysis, if an asset goes above the 200-day moving average the market is considered bullish, while a dip below the 200-day moving average is viewed as bearish. However, if the market extends to far above or below a moving average, it is likely to be pulled back towards it. The Mayer Multiple measures this gap and provides a historical context of the price.
The Mayer Multiple will be:
- Equal to 1 if the price of bitcoin matches the 200-day moving average,
- Less than 1 if the price of bitcoin is below the 200-day moving average, and
- More than 1 if the price of bitcoin is above the 200-day moving average.
The chart of the bitcoin price, the 200-day moving average the Mayer Multiple are displayed below. You will note that at first, the peaks of the Mayer Multiple were relatively high as bitcoin exhibited more volatility in its early day. However, as bitcoin matured, the peaks have decreased in their height. A similar pattern is observed for the troughs in the Mayer Multiple, with a record low posted at 0.236 during late 2011.
Source: Woobull Charts
As the chart above shows, the most recent peaks in the Mayer Multiple are at 3.76 and 2.45. The bottoms in price action coincide with a Mayer Multiple of around 0.40 to 0.51. Therefore, if the Mayer Multiple hits the 0.40-0.55 range, that could be a signal to buy and hold for the long-term. However, if the Mayer Multiple approaches 2.45 or 3.76, then it may provide a signal to sell bitcoin and wait for a correction to re-enter.
Historically, the Mayer Multiple has fallen below 1.5 whenever it has breached 2.4, suggesting that investors should buy bitcoin when the Multiple is less than 2.4. According to Trace Mayer, a value of 2.4 or more is considered as a speculative bubble and according to his back-testing, the optimal times to accumulate bitcoin are when the indicator is below 2.4.
The Mayer Multiple website displays the current price, Mayer Multiple and the percentage of time that bitcoin has been above that particular Mayer Multiple.
While the Mayer Multiple is a useful tool for the market, applying it in isolation may not yield the best results. Instead, combine the Mayer Multiple with other indicators or strategies for stronger confirmation of a top or bottom.