Market Regime

Trend direction based on Bitcoin's 20-period EMA on 12-hour candles.

In short: Market regime is my own measure, built from Bitcoin's 20-period EMA on 12-hour candles - bullish requires price above the EMA and the EMA rising - and unlike a black-box index it's fully transparent, but like any moving average it's lagging and can whipsaw in sideways markets.

What does market regime measure?

Unlike the other three measures under Market, the market regime isn't a number pulled from an external provider like alternative.me or CoinMarketCap - it's my own measure, calculated directly from Bitcoin's price history. The foundation is a moving average: a 20-period exponential moving average (EMA) calculated on Bitcoin's 12-hour candles. An exponential moving average weights more recent price data higher than older data, so it reacts faster to changes than a simple moving average would.

Beyond the EMA level itself, the slope also matters - how the EMA has moved over the last five candles. It's the combination of the two that determines the regime:

  • Bullish - price is above the EMA, and the EMA itself is rising more than 0.5% over the last five candles
  • Not clearly bullish - only one condition is met, for example price above the EMA while the EMA is flat or falling, or the reverse

The method is deliberately simple and transparent. Where the Fear & Greed Index and the Altcoin Season Index are built on formulas that aren't fully disclosed at their providers, the regime measure is something I calculate myself and can account for fully - it isn't a black box.

How do you read it?

A bullish regime is meant to signal that the market hasn't just risen recently, but that the rise has some momentum behind it - price is holding above its own moving average, and the average itself is trending upward. The opposite - price below a falling EMA - indicates a bearish regime, where both level and direction point downward.

Looking at the chart above, the regime will typically stay stable for extended periods when the market is in a clear trend - either up or down. It's during these periods that the measure is most useful: it confirms that a trend is intact and gives a simple, objective criterion to lean on instead of having to subjectively judge whether "the market feels strong or weak."

Shifts between regimes typically happen when a trend is genuinely turning - price crosses the EMA, and the slope flattens out or reverses. Because the regime is built on two criteria at once (price above/below the EMA and the EMA's slope), it's less noise-sensitive than looking at price versus the EMA alone, but that comes at the cost of speed.

When does the indicator lie?

The fundamental, unavoidable weakness of any moving average is that it's lagging by definition. A 20-period EMA weights recent data more heavily than a simple average would, but it's still calculated on historical prices - it can never catch a trend reversal at the exact moment it happens. The regime will always shift some time after the real turn in the market has begun, never before or at the same time.

The second major weakness shows up in sideways, consolidating markets. When price moves back and forth around the EMA with no clear direction, the regime can flip frequently between bullish and bearish as price crosses the EMA back and forth and the slope criterion is just barely met or not met from one reading to the next. In that kind of market, the shifts don't actually provide a useful signal - they're a consequence of the market having no clear direction to measure, not an expression of real regime change.

Finally, the 0.5% threshold for EMA slope is a fixed, calibrated cutoff - it isn't dynamically adjusted for how volatile the market generally is at a given time. In periods of unusually low volatility, the threshold can be hard to reach even in a genuine trend, while in periods of high volatility it can be crossed multiple times without reflecting any lasting shift. The regime should therefore be read as a simplified, mechanical description of trend - not a guarantee of what price does on the next candle.

How I use it

I use the regime measure as the most objective of the four signals under Market, precisely because it's my own and fully transparent in its calculation. I typically weigh it alongside the Fear & Greed Index, Bitcoin dominance, and the Altcoin Season Index - when several of these point the same way, it carries more weight than the regime standing alone. I regularly review concrete examples of how regime shifts have tracked, or failed to track, the other indicators in the articles.