Debt-Cycle vs Bitcoin-Cycle

Debt-Cycle vs Bitcoin-Cycle Indicator

The Debt-Cycle vs Bitcoin-Cycle indicator is a macro-economic analysis tool that compares traditional financial market cycles (debt/credit cycles) against Bitcoin market cycles. It uses Z-score normalization to track the relative positioning of global financial conditions versus cryptocurrency market sentiment, helping identify potential turning points and divergences between traditional finance and digital assets.
Key Features

Dual-Cycle Analysis: Simultaneously tracks traditional financial cycles and Bitcoin-specific cycles

Z-Score Normalization: Standardizes diverse data sources for meaningful comparison

Multi-Asset Coverage: Analyzes currencies, commodities, bonds, monetary aggregates, and on-chain metrics

Divergence Detection: Identifies when Bitcoin cycles move independently from traditional finance

21-Day Timeframe: Optimized for Long-term cycle analysis

What It Measures
Finance-Cycle (White Line)
Tracks traditional financial market health through:

Currencies: USD strength (DXY), global currency weights (USDWCU, EURWCU)
Commodities: Oil, gold, natural gas, agricultural products, and Bitcoin price
Corporate Bonds: Investment-grade spreads, high-yield spreads, credit conditions
Monetary Aggregates: M2 money supply, foreign exchange reserves (weighted by currency)
Treasury Bonds: Yield curve (2Y/10Y, 3M/10Y), term premiums, long-term rates

Bitcoin-Cycle (Orange Line)
Tracks Bitcoin market positioning through:

On-Chain Metrics:

MVRV Ratio (Market Value to Realized Value)
NUPL (Net Unrealized Profit/Loss)
Profit/Loss Address Distribution


Technical Indicators:

Bitcoin price Z-score
Moving average deviation


Relative Strength:

ETH/BTC ratio (altcoin strength indicator)



Visual Elements

White Line: Finance-Cycle indicator (positive = expansionary conditions, negative = contractionary)
Orange Line: Bitcoin-Cycle indicator (positive = bullish positioning, negative = bearish)
Zero Line: Neutral reference point

Interpretation
Cycle Alignment

Both positive: Risk-on environment, favorable for crypto
Both negative: Risk-off environment, caution warranted
Divergence: Potential opportunities or warning signals

Divergence Signals

Finance positive, Bitcoin negative: Bitcoin may be undervalued relative to macro conditions
Finance negative, Bitcoin positive: Bitcoin may be overextended or decoupling from traditional finance

Important Limitations
This indicator uses some technical and macro data but still has significant gaps:

⚠️ Limited monetary data - missing:

Funding rates (repo, overnight markets)
Comprehensive bond spread analysis
Collateral velocity and quality metrics
Central bank balance sheet details


⚠️ Basic economic coverage - missing:

GDP growth rates
Inflation expectations
Employment data
Manufacturing indices
Consumer confidence


⚠️ Simplified on-chain analysis - missing:

Exchange flow data
Whale wallet movements
Mining difficulty adjustments
Hash rate trends
Network fee dynamics


⚠️ No sentiment data - missing:

Fear & Greed Index
Options positioning
Futures open interest
Social media sentiment



The indicator provides a high-level cycle comparison but should be combined with comprehensive fundamental analysis, detailed on-chain research, and proper risk management.
Settings

Offset: Adjust the horizontal positioning of the indicators (default: 0)
Timeframe: Fixed at 21 days for optimal cycle detection

Use Cases

Macro-crypto correlation analysis: Understand when Bitcoin moves with or against traditional markets
Cycle timing: Identify potential tops and bottoms in both cycles
Risk assessment: Gauge overall market conditions across asset classes
Divergence trading: Spot opportunities when cycles diverge significantly
Portfolio allocation: Balance traditional and crypto assets based on cycle positioning

Technical Notes

Uses Z-score normalization with varying lookback periods (40-60 bars)
Applies HMA (Hull Moving Average) smoothing to reduce noise
Asymmetric multipliers for upside/downside movements in certain metrics
Requires access to FRED economic data, Glassnode, CoinMetrics, and IntoTheBlock feeds
21-day timeframe optimized for cycle analysis

Strategy Applications
This indicator is particularly useful for:

Cross-asset allocation - Decide between traditional finance and crypto exposure
Cycle positioning - Identify where we are in credit/debt cycles vs. Bitcoin cycles
Regime changes - Detect shifts in market leadership and correlation patterns
Risk management - Reduce exposure when both cycles turn negative


Disclaimer: This indicator is a cycle analysis tool and should not be used as the sole basis for investment decisions. It has limited coverage of monetary conditions, economic fundamentals, and on-chain metrics. The indicator provides directional insight but cannot predict exact timing or magnitude of market moves. Always conduct thorough research, consider multiple data sources, and maintain proper risk management in all investment decisions.