Altcoin Relative Macro Strength

Altcoin Relative Macro Strength

Overview

The Altcoin Relative Macro Strength indicator measures the altcoin market's price performance relative to global macroeconomic conditions. By comparing TOTAL3ES (total altcoin market capitalization excluding Bitcoin, Ethereum and stable coins) against a composite macro trend, the indicator identifies periods of relative overvaluation and undervaluation.


Methodology

Global Macro Trend Calculation:

The macro trend synthesizes three primary components:

- ISM PMI – A proxy for the business cycle phase

- Global Liquidity – An aggregate measure of major central bank balance sheets and broad money supply

- IWM (Russell 2000) – Small-cap equity exposure, reflecting risk-on/risk-off market sentiment


Global Liquidity is calculated as:

Fed Balance Sheet - Reverse Repo - Treasury General Account + U.S. M2 + China M2

The final Global Macro Trend is:

ISM PMI × Global Liquidity × IWM


Theoretical Framework:

The global macro trend integrates liquidity expansion/contraction with business cycle dynamics and small-cap equity performance. The inclusion of IWM reflects altcoins' tendency to behave as high-beta risk assets, exhibiting sensitivity similar to small-cap equities. This composite exhibits strong directional correlation with altcoin market movements, capturing the risk-on/risk-off dynamics that drive altcoin performance.




Interpretation

Primary Signal:

The histogram displays the rolling percentage change of TOTAL3ES relative to the global macro trend (default: 21-period average). Positive divergence indicates altcoins are outperforming macro conditions; negative divergence suggests underperformance relative to the underlying economic and risk environment.


Data Tables:

Alts/Macro Change – Percentage deviation of the altcoin market's average value from the Global Macro Trend's average over the specified period

Macro Trend – Directional assessment of the macro trend based on slope and trend agreement:

🔵 BULLISH ▲ – Positive slope with upward trend
⚪ NEUTRAL → – Slope and trend direction disagree
🟣 BEARISH ▼ – Negative slope with downward trend

Macro Slope – Percentage rate of change in the global macro trend
Altcoin Valuation – Relative valuation category based on TOTAL3/Macro deviation:

🟢 Extreme Discount / Deep Discount / Discount
🟡 Fair Value
🔴 Premium / Large Premium / Extreme Premium

TOTAL3ES Mcap – Current total altcoin market capitalization (in billions)


Visual Components:

📊 Histogram: Alts/Macro Change
🟢 Green = Positive deviation (altcoins outperforming)
🔴 Red = Negative deviation (altcoins underperforming)

📈 Macro Slope Line
Color-coded to match trend assessment
Scaled for visibility (adjustable in settings)


Application

This indicator is designed to identify mean reversion opportunities by highlighting periods when the altcoin market materially diverges from fundamental macro and risk conditions. Extreme positive values may indicate overvaluation; extreme negative values may signal undervaluation relative to the prevailing economic and risk appetite backdrop.


Strategy Considerations:

- Identify extremes: Look for periods when the histogram reaches elevated positive or negative levels

- Assess valuation: Use the Altcoin Valuation reading to gauge relative over/undervaluation
Confirm with risk sentiment: Check whether macro conditions and risk appetite support or contradict current price levels

- Mean reversion: Consider that significant deviations from trend historically tend to revert

Note: This indicator identifies relative valuation based on macro conditions and risk sentiment—it does not predict price direction or timing.


Settings

Lookback Period – 21 bars (default) – Number of bars for calculating rolling averages
Macro Slope Scale – 3.0 (default) – Multiplier for macro slope line visibility