Original author: bonnazhu, Nothing Research

Original source: X

Editor's note: As April progresses, the Bitcoin halving is getting closer. Recently, the price of gold has broken through historical highs, and the prices of silver and copper have also soared. However, BTC, which has strong safe-haven properties, has been hovering around 70,000. (Reference: "Bull Market in Geopolitical Crisis: Why is BTC still hesitant under multiple positive factors?") Perhaps, we are still in the early stages of this bull market. Nothing Research team member bonnazhu shared on X how to identify the turning point of the big cycle. BlockBeats reprinted the full text as follows:

Identifying the turning point of a large cycle is much more meaningful than discussing how long the bull market will last and the exit price of $BTC and $ETH. Although there are different ways to determine the turning point, there is only one truth to verify, that is, it must be confirmed on the K-line chart. If you judge the turning point too early or too late than the market, you will suffer. I personally think that the most effective way to verify, and even the indicators that can be used directly to determine the turning point are: 1) RSI divergence; 2) moving average arrangement.

TLDR：

Whether it is $BTC or $ETH, although the weekly RSI has been in the overbought area for a while (this is very common in a bull market), there has never been a real weekly divergence. The daily and weekly moving averages are also in a bullish state, and there is no sign of turning around. Most prices and transactions are also running above the short-term moving average. The callback has not touched the long-term moving average, and even the 100-day moving average at the daily level has not been broken. Obviously, the market is still far from the end. There will certainly be shocks and callbacks in the future, but this is not important. What is important is that when the turning point really comes, can you abandon your preconceived obsessions and expectations for the target price and generously acknowledge the objective facts?

Let’s talk about RSI and moving average again:

1) RSI divergence

It mainly refers to the phenomenon that the price hits a new high, but the RSI does not hit a new high or even turns downward, which is called "top divergence"; or it refers to the phenomenon that the price hits a new low, but the RSI does not hit a new low or even turns upward, which is called "bottom divergence".

The characteristic of this indicator is that it is "ahead" of the market. Often when the signal appears, the price has not yet reflected it. In many cases, the price continues to rise or fall. However, the power of this indicator also lies in that the longer the divergence time and the more times the divergence occurs, the stronger the reversal signal.

In terms of the big cycle, the weekly RSI divergence is more meaningful, because this signal occurs relatively less frequently, basically 1-2 times, so there is less interference, while the daily RSI divergence occurs more frequently, and often corresponds to a phased callback rather than a reversal. Take BTC as an example:

In practice, it is found that the top divergence often occurs more than once in a cycle, and there have been repeated divergences in the past, while the bottom divergence often takes shape at one time. I personally speculate that this seems to be closely related to human greed and fear: in the top divergence, even if the market shows signs of overbuying, due to the general optimism of participants, they may ignore the risks and continue to push up prices. On the contrary, during the bottom formation period, due to the general pessimism in the market, investors tend to act conservatively or lie flat, which reduces market activity and gives smart money the opportunity to intervene and promote reversals, so it is easy to take shape at one time. However, as market funds become more mature and rational, repeated top divergences will become less and less, so this indicator is still the core reference for verifying the turning point of the big cycle.

2) Moving average arrangement

It mainly refers to the phenomenon that the short-term moving average (5-day moving average) is above the medium-term moving average (25-day and 50-day moving average), and the medium-term moving average is also above the long-term moving average (100-day and 200-day moving average), and the moving averages are generally upward, which is called "bullish arrangement"; or it refers to the phenomenon that the short-term moving average (5-day moving average) is below the medium-term moving average (25-day and 50-day moving average), and the medium-term moving average is also below the long-term moving average (100-day and 200-day moving average), and the moving averages are generally downward, which is called "short arrangement".

The characteristic of this indicator is that it "lags" behind the market. Often, when a short position turns into a long position, or a long position turns into a short position, the top or bottom has already passed for a while. Therefore, we pay more attention to the turning point where the arrangement may begin to change. This turning point is often described by "golden cross" or "death cross". "Golden cross" means that the short-term moving average crosses the medium- and long-term moving average upwards, and "death cross" means that the short-term moving average crosses the medium- and long-term moving average downwards.

Since the moving average has a "lag" nature, it is recommended that the weekly and daily lines be used to verify each other. Let's still take BTC as an example:

In practice, we will find that in fact, our market is long bull and short bear. In the true sense, the bear market with a complete short position formation and continuous decline only lasts for a few months. In addition, although the "golden cross" and "death cross" will be confirmed earlier than the moving average pattern, they appear more frequently and cause more disturbances. However, this disturbance actually corresponds to the repeated market conditions and the game between long and short forces, as well as the multiple selling and buying points in the bull and bear cycles. It is impossible to accurately touch the top and bottom, so try a few more times.