Bitcoin‘s remarkable 150% increase this year has revealed a bias known as the “anchoring effect” among investors, which is a tendency to place too much trust in the first piece of information encountered. Especially due to the steep bear market in 2022, this bias has led to expectations of a price drop among investors.
Traditional finance investors looking to invest in Bitcoin tend to expect lower prices due to the rarity of traditional assets doubling in value within a year. Furthermore, investors often exhibit “loss aversion” behavior, which is a tendency to exit profitable trades early and hold on to losing trades for a longer period.
In contrast to these cognitive biases, Bitcoin’s fundamental on-chain indicators such as the Puell Multiple, MVRV Z-Score, and Mayer Multiple suggest that the price of the largest cryptocurrency is not excessively high and could continue its rally into 2024.
One of Bitcoin’s key on-chain indicators, the Puell Multiple, is calculated by dividing the daily BTC mining value by the 365-day moving average and is currently at 1.53. The indicator, which is well below the red zone level of 4, suggests that the price could rise further. Experts are evaluating that after the expected Bitcoin block reward halving in April 2024, the indicator could enter a consolidation zone.
The Mayer Multiple indicator measures the difference between Bitcoin’s market price and its 200-day Simple Moving Average (SMA), showing a level of 1.404. This indicates that Bitcoin could rise further before reaching overbought levels according to the 200-day SMA, an important indicator in technical analysis.