Definition. This model attempts to detect transitional periods between bull and bear markets, and bear to bull markets. It is developed by assessing periods where the correlation between Price and Percent Supply in Profit deteriorates below 0.75, and where a select indicator for extreme bull/bear conditions is reached. Top Detection prints as blue columns, Floor Detection as red columns, over price (dark grey), Realized Price (orange) and the 2.4x 200D-SMA threshold line (purple).

Technical. The detection logic combines a rolling correlation with regime filters:

• Correlation = corr(Price, Percent Supply in Profit, 7)
• Floor Detection (red) = Correlation < 0.75 AND Price <= Realized Price (equivalent to MVRV < 1.0)
• Top Detection (blue) = Correlation < 0.75 AND Mayer Multiple >= 2.4, where Mayer Multiple = Price / sma(Price, 200)

Interpretation. The deterioration in correlation between price and supply profitability can be described via one of the following scenarios:

• Transition from Bear to Bull Market (Floor Detection), where the bear market is at its later stages and sellers are exhausted. The remaining investor cohort becomes reluctant to move their funds at depressed prices, and thus the correlation between price and supply profitability deviates from the 0.9–1 range.

• Transition from Bull to Bear Market (Top Detection), where the bull market enters an exuberant parabolic phase, and nearly 100 percent of the supply is in profit as prices trade to new ATHs. Therefore, the correlation between price and profitability diminishes until the market enters a sustained correction.

The bull and bear thresholds are added via double if-then statements, to help filter only for correlation breakdowns occurring at market extremes. The Mayer Multiple > 2.4 (bull tops) and MVRV < 1.0 (bear floors) have been selected in this instance. These thresholds are arbitrary, and may be changed, removed, or replaced to calibrate the signal (for example to be less sensitive when spotting local tops/bottoms within a trend).

Notes. Coined by Glassnode in Market Pulse: Utilizing Drilling Concepts in On-chain Analysis (September 2022). Built from Percent Supply in Profit and Realized Price.