This investor tool was designed by Philip Swift to help long-term investors determine when prices may be approaching cyclical highs or lows. It uses two simple moving averages as a benchmark for judging whether prices are undervalued or overvalued: the 2-year moving average (green) and the 5x multiple of the 2-year moving average (red).
When prices trade below the 2-year moving average, it has historically tended to generate excess returns and signal bear market cycle lows. This means the price is likely to be lower and is an investment opportunity.
And when prices trade above 5x multiples of the 2-year moving average, historically it often heralds the apex of a bull market cycle and is an area for investors to reduce risk. This means prices may be higher and investors may choose to reduce risk.
Let's say the price of an asset has been trading below its 2-year moving average, and historically this has tended to produce good returns.
At this time, investors can consider buying this asset because the price may be undervalued.
Another situation is that if the price has been trading above 5 times the 2-year moving average, and historically this situation has often been the peak of a bull market, investors may choose to reduce the risk of holding this asset. , you may consider selling or reducing your position.
However, I have said before that the on-chain data model is derived from historical data, and the new wave of bull and bear market data has gradually become slightly decoupled from this model. This model can only be used as one of the reference data.
In addition, this is not suitable for contract operations or hedging operations, and is more suitable for long-term investors.