BTC Cycle Composite Indicator

BTC Cycle Composite Indicator: A Multi-Factor Approach to Identifying Market Tops and Bottoms
Introduction
The Bitcoin market is characterized by distinct four-year cycles driven by halving events, yet accurately pinpointing cycle tops and bottoms remains a challenge even for experienced traders. Single indicators often generate false signals or lag significantly. The BTC Cycle Composite Indicator addresses this by integrating multiple proven on-chain metrics, technical analysis tools, and cycle-based models into a single coherent framework. Its goal is to provide traders with a probabilistic risk score that highlights periods of extreme overvaluation (potential tops) and undervaluation (potential bottoms), while filtering out noise through advanced confirmation mechanisms.

Core Design Philosophy
The indicator is built on a multi-factor voting system. Instead of relying on any single metric, it aggregates signals from a diverse set of independent indicators that capture different aspects of market behavior:

On-chain valuation (MVRV Z-Score, Puell Multiple, CVDD, NUPL) reflects the positioning of long-term holders and miners.

Technical momentum (Pi Cycle Oscillator, RSI, price deviation from moving averages) identifies price extremes.

Cycle timing (halving progress, post-halving windows) anchors the analysis within the historical rhythm of Bitcoin.

Market structure (Power Law channel, V/T Ratio, 15% rule) adds context about the broader macro trend.

Each indicator contributes to a risk score (0–100), and only when a sufficient number of them align—and additional filters (trend, volatility, signal spacing) are satisfied—does the indicator generate a clear visual signal.

Detailed Component Breakdown
1. On-Chain Metrics (Simulated for Demonstration)
MVRV Z-Score: Compares market value to realized value, normalized by standard deviation. Historically, values above 7 have marked major tops, while values near 0.1 have indicated bottoms. The indicator can also use a dynamic 6‑month rolling Z‑score to adapt to changing market structure.

Puell Multiple: Measures miner revenue relative to its 365‑day moving average. Extremely high values (>3.33) suggest miner over‑profitability and potential selling pressure; very low values (<0.5) signal miner capitulation and bottoms.

CVDD (Cumulative Value Coin Days Destroyed): A bottom‑capture metric that tracks the dollar value of coin‑days destroyed. When price falls below the CVDD extension line, it historically marked strong accumulation zones.

NUPL (Net Unrealized Profit/Loss): Gauges the aggregate profit/loss status of the market. NUPL > 0.75 corresponds to extreme greed (euphoria), while negative values indicate fear.

2. Technical Indicators
Pi Cycle Oscillator: Unlike the classic Pi Cycle Top indicator that waits for a 111 SMA / 350 SMA×2 cross, this oscillator measures the percentage distance between the two moving averages. When this value exceeds a user‑defined threshold (e.g., 80%), it serves as an early warning of an overheated market.

Price Deviation from 200‑day SMA: A simple yet powerful mean‑reversion tool. Deviations above +50% have historically coincided with tops, while deviations below -20% align with bottoms.

RSI (14): Standard overbought/oversold levels (70/30) are used, but they are only considered in conjunction with other factors.

V/T Ratio: Compares on‑chain transaction value to token velocity; extreme deviations from its moving average can signal turning points.

3. Cycle and Structural Factors
Halving Progress: The indicator calculates the exact position between two consecutive halvings. Four color‑coded phases (green, lime, yellow, red) visually represent the typical market sentiment progression.

Top/Bottom Windows: Historical data shows that cycle tops often occur 528–548 days after a halving, while bottoms tend to form within the first 200 days. These windows are used as soft filters.

Power Law Channel Position: Based on the long‑term power law regression, prices near the upper band (>80th percentile) are considered overextended, while those near the lower band (<20th percentile) are undervalued.

15% Rule (optional): When price drops more than 15% from its 500‑day high after a series of strong bullish candles, it may indicate distribution by smart money—a supplementary top confirmation.

4. Altcoin Season Signals
Bitcoin dominance (BTC.D) is monitored for sharp moves. A decline of more than 2% over 14 days suggests capital rotation into altcoins, while a rise of more than 2% indicates Bitcoin strength. These raw signals are further validated by:

Price position relative to 200‑day SMA.

RSI entering oversold (for alt‑season) or overbought (for BTC‑season) territory.

Volume spikes (above 1.5× the 20‑day average).

Candlestick patterns (hammer/bullish engulfing for buys; shooting star/bearish engulfing for sells).

How the Components Work Together
The indicator does not simply flash a signal when any one metric triggers. Instead, it employs a multi‑stage aggregation and filtering process:

Risk Score Calculation
Each of the ten top‑oriented and eight bottom‑oriented indicators votes independently. The percentage of active indicators forms the raw risk score (e.g., 7 out of 10 = 70% top risk).

Weighted Adjustment (Optional)
Because some indicators are more predictive during specific cycle phases, the indicator can apply dynamic weights. For example, Pi Cycle and MVRV receive higher weights in the late halving phase (red zone), while Puell and CVDD are emphasized in the early phase (green zone).

Multi‑Stage Filtering

Trend Filter: Signals are only considered if they align with the primary trend (price above/below 200‑day SMA).

Volatility Filter: Using ATR, signals are discarded during low‑volatility consolidation unless volatility exceeds 1.2× its 20‑day average.

Momentum Filter: Requires the short‑term moving average to be sloping in the direction of the signal (e.g., for a top signal, price should be above its 20‑day MA and the MA should be rising).

Signal Suppression: After a signal is generated, no further signals of the same type are allowed for a user‑defined number of bars (default 20) to prevent clustering.

Confirmation Bars: A signal must persist for a minimum number of consecutive bars (default 2) before being displayed.

Visual Output

Colored Background: The chart background gradually shifts from green (early accumulation) to red (late distribution) based on halving progress, providing an intuitive sense of cycle phase.

Halving Markers: Blue vertical lines and labels mark each halving date.

Cycle Top/Bottom Labels: When all filters are satisfied, a red “Cycle Top” label appears above the bar (with the current risk score), and a blue “Cycle Bottom” label appears below.

Arrow Signals: Small red downward arrows (⬇️TOP) and green upward arrows (⬆️BOT) are plotted on every qualifying bar for easy spotting.

Buy/Sell Signals: For altcoin‑season entries, tiny green “🪙 BUY” triangles at the bottom and orange “₿ SELL” triangles at the top are displayed.

Risk Score Panel: A table in the bottom‑right corner shows the current top/bottom risk percentages and the number of triggered indicators, updated in real time.

Practical Usage
Recommended Settings
Timeframe: Daily or weekly charts work best, as the underlying metrics are designed for medium‑ to long‑term cycles.

Parameters: Most thresholds (e.g., MVRV levels, Pi Cycle oscillator threshold, minimum risk score) are adjustable. Beginners can keep the defaults; advanced users may fine‑tune based on backtesting.

On‑Chain Data Source: The indicator currently uses simulated MVRV, Puell, etc., for demonstration. For live trading, replace these with real data sources such as CRYPTOCAP:BTC.MVRV or subscribe to a reliable on‑chain data provider.

Interpretation
A top risk score above 60 accompanied by a red background and a “Cycle Top” label suggests that multiple independent metrics are flashing warning signs. This is a signal to consider taking profits or tightening stops.

A bottom risk score above 60 in the green zone with a “Cycle Bottom” label indicates a historically favorable accumulation area.

The BUY/SELL signals are more tactical and may appear more frequently; they should be used in conjunction with the broader cycle context.

Limitations and Disclaimer
No indicator is infallible. The BTC Cycle Composite Indicator is a tool for probability assessment, not a crystal ball. Past performance does not guarantee future results. Users should always combine it with fundamental analysis, order book data, and proper risk management. The indicator’s parameters may need periodic adjustment as market dynamics evolve (e.g., the Pi Cycle oscillator threshold may drift over time).

Originality and Innovation
While the individual indicators are well‑known, their combination and the filtering logic are original:

Dynamic weighting based on halving progress adapts the model to different cycle phases.

Multi‑timeframe confirmation (optional weekly RSI check) adds an extra layer of robustness.

15% rule provides a unique structural filter for top detection.

Signal suppression and momentum filters drastically reduce false positives compared to a simple “majority vote” approach.

The risk score panel gives users immediate insight into the internal state of the model, fostering transparency.

Conclusion
The BTC Cycle Composite Indicator is designed for traders who want a comprehensive, data‑driven view of Bitcoin’s cyclical extremes. By aggregating diverse metrics and applying rigorous filtering, it aims to highlight high‑probability turning points while minimizing noise. Whether you are a long‑term investor seeking accumulation zones or a swing trader looking for trend shifts, this indicator offers a structured way to interpret the complex interplay of on‑chain, technical, and cyclical forces that drive Bitcoin’s market cycles.