A New Crypto Timing Indicator: PART 1
Introducing The REKTelligence AROC Indicator
IN TODAY’S REPORT
What we cover: Technical View edition. Introducing the REKTelligence AROC indicator. Promising major timing signals for Bitcoin and Ether.
TODAY’S TECHNICAL VIEW
Introducing The REKTelligence AROC Indicator (Part 1)
Even though Bitcoin’s performance has smoked the performance of all other liquid asset classes since its inception, its annualized returns have nevertheless been falling for years. While diminishing Bitcoin returns are certainly not news, we believe that there’s sufficient evidence that the annual rate of change (AROC) of that return may provide helpful market timing signals going forward.
With this in mind, we’re pleased to introduce the REKTelligence AROC indicator.
BITCOIN (BTCUSD). Daily Chart with REKTelligence AROC Indicator.
The REKTelligence Annual Rate of Change (AROC) indicator is derived from the asset’s annualized return since inception, measuring the rate of change in the asset’s annualized percentage return versus the same measure one year ago:
REKTelligence AROC = (Annualized % Return - Annualized % Return of 1 year ago) / Annualized % Return of 1 year ago * 100
Now that Bitcoin’s rolling annualized return (blue line on chart) has lost the initial volatility caused by insufficient market history (i.e., data) in its early years (not shown), the rolling annualized return remains in a fairly steady downward trend. But if we instead measure the annual rate of change (AROC) of that rolling annualized return and apply a moving average to the AROC, we can identify potentially meaningful shifts in the underlying asset.
Our chart shows much of the last cycle in Bitcoin, from June 2020 through late October 2021 just prior to Bitcoin’s all-time high made on November 8, 2021. Note that Bitcoin’s AROC moves above its 200ma in late September 2020, indicating that the subtle shift in AROC momentum which had been building since the summer had now moved to its highest level in over 200 days. While different assets will likely benefit from alternate moving average values unique to the asset class — an area of further research — the 200ma works well with Bitcoin and Ether in our view.
When Bitcoin’s AROC closed back below its 200ma on 5/14/2021, Bitcoin was off of its April high but still trading at 49,890 — well above the sub-30,000 levels it would soon trade at in late May.
In our next report, we’ll take a look at the REKTelligence AROC indicator readings now for both Bitcoin and Ether and what they suggest about crypto leadership as we moving into the fall. See you at the next report!
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THE TLDR
A Few Key Takeaways
✔ We believe that there’s sufficient evidence that the annual rate of change (AROC) of that return may provide helpful market timing signals going forward ✔ REKTelligence Annual Rate of Change (AROC) indicator is derived from the asset’s annualized return since inception, measuring the rate of change in the asset’s annualized percentage return versus the same measure one year ago ✔ While different assets will likely benefit from alternate moving average values unique to the asset class — an area of further research — the 200ma works well with Bitcoin and Ether in our view
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