Psychology: Disbelief & Fear. This zone marks cyclical bottoms where retail interest is non-existent. Smart Money and long-term holders aggressively accumulate to lower their cost basis. Historically the highest ROI zone for multi-year holds.
Psychology: Hope & Optimism. Price action recovers key technical levels. Retail investors begin returning to the market, driving organic momentum. Buying dips in this zone is generally considered a trend-following strategy.
Psychology: Belief & Greed. The market is heating up. On-chain data typically shows "Smart Money" (wallets >10 years old) beginning to sell coins to new entrants. Risk management involves realizing partial profits.
Psychology: Extreme Greed. Prices detach from fundamentals as leverage builds up. This phase often coincides with "Alt Season" as capital rotates down the risk curve. A dangerous zone for new entries.
Psychology: Delusion. Historically precedes major cycle corrections of >30%. Liquidity becomes thin, and the market becomes highly sensitive to macro shocks or deleveraging events. Capital preservation is the priority.
Engine Architecture
The MaxMetrics Risk Score is not a simple average. It is a weighted, multi-factor algorithm that processes five distinct data buckets to quantify market "froth."
1. ETF Flows & Corporate (28% Weight)
In the post-2024 cycle, Wall Street is the dominant price setter. We track net inflows/outflows in US Spot Bitcoin ETFs over 1, 3, 5, and 10-day rolling windows to gauge institutional conviction. Sustained inflows reduce risk; heavy outflows spike risk.
2. Macro Liquidity (25% Weight)
Crypto is a liquidity sponge. This bucket tracks the Global M2 Money Supply, Real 10-Year Yields, and the Broad Dollar Index (DXY). When global liquidity contracts (QT), crypto faces headwinds regardless of its fundamentals.
3. On-Chain Cyclical (22% Weight)
The blockchain provides a source of truth that traditional assets lack. We utilize the CBBI (Confidence Index) and SOPR (Spent Output Profit Ratio) to determine if current prices are supported by holder behavior or driven by leverage.
4. Derivatives Structure (15% Weight)
The "Casino" factor. We monitor Open Interest relative to Market Cap and Funding Rates. High leverage with high funding suggests a fragile market prone to "long squeezes" or liquidation cascades.
5. Sentiment & TradFi (10% Weight)
Behavioral economics. We analyze the VIX (Stock Market Fear Gauge) and the Crypto Fear & Greed Index. Historically, crypto cannot sustain a rally if the S&P 500 is in a volatility crisis.
⚠️ System Circuit Breakers
The engine contains "hard overrides" that bypass the weighted average if critical structural failures are detected. These are binary risk events:
| Trigger Name | Condition | Impact |
|---|---|---|
| ETF Exodus | 5-Day Net Outflow > 1,500 BTC | Force Score > 80 |
| Liquidity Shock | Macro Score drops below -2.0 | Force Score > 75 |
| Leverage Bubble | Derivatives Risk > 80/100 | Force Score > 78 |
| Mania | CBBI > 90 or Dominance > 60% | Force Score > 82 |