🟪Mayer Multiple

The Mayer Multiple is a simple metric used to gauge whether Bitcoin is overvalued, undervalued, or fairly priced compared to its long-term historical trend.

For those who prefer video tutorials, this breaks down every single aspect of our take on the Mayer Multiple:

Introduction

The Mayer Multiple is a straightforward yet powerful tool designed to help Bitcoin traders and investors quickly assess the asset’s price in relation to its long-term trend. Developed and popularized by investor Trace Mayer, this metric compares Bitcoin’s current price to its 200-day moving average (200DMA) — a widely respected benchmark for identifying the prevailing market direction. By expressing this relationship as a single number, the Mayer Multiple makes it easy to see whether Bitcoin is trading at a historically high, low, or average level. Over the years, this simple ratio has gained a reputation for highlighting potential accumulation zones during market downturns, as well as signaling overheated conditions during parabolic rallies. While it isn’t a crystal ball, the Mayer Multiple offers valuable context that can help traders align their strategies with the broader market cycle, avoiding emotional decision-making in volatile conditions.

Rainbow Trends took this tool a step further and visualized it in a way beyond the base MM Number that people commonly reference. By visualizing this data, Traders can more easily predict where Bitcoin is likely Topping our or Bottoming in the traditional 4 year cycle.

Behind The Math

he Mayer Multiple is a simple metric used to gauge whether Bitcoin is overvalued, undervalued, or fairly priced compared to its long-term historical trend.

It’s calculated as:

This resulting calculation (SD) gives us a number from 0.4 SD to 8.3 SD (typically). For Rainbow Theory Traders, they follow these numbers diligently to ensure they are stacking or taking profits at the appropriate times.

Points of Interest

Accumulation is typically seen below 0.9SD:

Distribution is typically seen above 2.0SD:

The 2.4 Rule

During the original generation of the Mayer Multiple it was revealed in back testing that buying above the 2.4SD results in diminishing returns and in general should be avoided. This 2.4SD Level is marked on every Rainbow Trends Mayer Chart:

Further break down of why this rule exists:

• Historical Pattern: If you look at Bitcoin’s entire price history, the most extreme speculative peaks — like late 2013, late 2017, and early 2021 — often occurred when the Mayer Multiple spiked well above 2.4.

• Overheated Zone: A Mayer Multiple above 2.4 means Bitcoin is trading at over 240% of its 200-day moving average. This is a strong signal that price has run far ahead of its long-term trend, usually fueled by hype, FOMO, and speculative buying.

• Mean Reversion Risk: Historically, whenever BTC has been that far above its long-term average, it eventually reverted back toward (or below) the 200DMA — often with sharp drawdowns of 30% to 80%.

• Probability vs. Reward: Above 2.4, the probability of short-term gains becomes smaller compared to the risk of a major correction. Buying in that zone historically meant you were more likely catching the tail end of a rally rather than the start.

If you are still having issues or have questions, please feel free to reach out to us at [e-mail] or message us in the Rainbow Trends Discord.