Bitcoin Macro Oscillator | [DeV]

The Bitcoin Macro Oscillator (BMO) is a sophisticated fundamental indicator designed to provide a comprehensive view of Bitcoin’s market conditions by combining four key on-chain metrics: the Market Value to Realized Value (MVRV) Ratio, Volume-Weighted Average Price (VWAP) Ratio, Cumulative Value-Days Destroyed (CVDD) Ratio, and Sharpe Ratio. These metrics are individually z-scored and weighted according to user-defined preferences, then averaged to produce a single oscillating value, the BMO Z-score. This helps users identify whether Bitcoin is in a bullish (above zero) or bearish (below zero) phase, offering insights into potential market tops, bottoms, and overall trend strength. Inspired and reverse engineered from the BMO of Woonomics, this indicator is enhanced with a customizable moving average.

Market Value to Realized Value (MVRV) Ratio
The MVRV Ratio compares Bitcoin’s current market capitalization (price multiplied by circulating supply) to its realized capitalization (the value of all coins at the price they were last moved on the blockchain). Calculated as MVRV = Market Cap / Realized Cap, it is then z-scored over a user-defined lookback period (default 120 days). This metric tracks whether Bitcoin is overvalued (high MVRV, suggesting a market top) or undervalued (low MVRV, indicating a potential bottom), providing a gauge of investor profitability and market sentiment.

Volume-Weighted Average Price (VWAP) Ratio
The VWAP Ratio measures Bitcoin’s current price against its volume-weighted average price, which is computed by summing the product of price and volume over a lookback period (default 120 days) and dividing by total volume, with a fallback to the current price if volume is zero. The ratio is z-scored to standardize it. This tracks the relationship between price and the average price paid with volume consideration, helping identify overbought or oversold conditions—high values may signal tops, while low values suggest bottoms.

Cumulative Value-Days Destroyed (CVDD) Ratio
The CVDD Ratio is based on the CVDD metric, which estimates the total value of Bitcoin that has been “destroyed” (spent at a loss) over time, approximated here using a longer-term simple moving average (SMA) of the price over twice the lookback period. The ratio is calculated as the current price divided by this CVDD price, then z-scored. It tracks the accumulation of value destruction, with low values indicating bearish exhaustion and high values suggesting bullish momentum.

Sharpe Ratio
The Sharpe Ratio assesses Bitcoin’s risk-adjusted return by comparing the average return (calculated as the natural log of the price change) to its volatility (standard deviation of returns) over a user-defined Sharpe lookback period (default 180 days). If volatility is zero, it defaults to zero to avoid errors. This z-scored value tracks whether Bitcoin’s price movements offer a favorable return for the risk taken—positive values indicate good risk-adjusted performance, while negative values suggest caution.

Together, the MVRV, VWAP, CVDD, and Sharpe Ratio metrics provide a multi-faceted view of Bitcoin’s market health, with each contributing unique insights into valuation, volume, value destruction, and risk-adjusted performance. Their weighted combination into the BMO Z-score balances these inputs to offer a unified signal, enhanced by a customizable moving average (default 90-period EMA) that smooths the Z-score for trend confirmation—rising when bullish, falling when bearish. Credit to Woonomics for inspiring this robust framework, which adapts their BMO concept into a flexible, user-tailored tool.