OPEN-SOURCE SCRIPT
deKoder | Business Cycle vs Bitcoin
This indicator overlays Bitcoin's detrended momentum with the US ISM Manufacturing PMI (a key business cycle proxy) to visually dissect the relationship between crypto cycles and broader economic health.
Inspired by ongoing debates in crypto macro analysis (e.g., "Is there a 4-year halving cycle, or is it just the business cycle?"), it highlights potential lead-lag dynamics - challenging the popular view that PMI strictly leads Bitcoin rallies and tops.
Key Features
• BTC Momentum Wave (Yellow/Orange Line):
Detrended deviation from Bitcoin's long-term "fair value" (24-month SMA).
Formula: ((close / sma(close, 24)) * 100 - 100) * 0.15
- Positive (yellow): BTC overvalued relative to trend | bullish momentum
- Negative (orange): Undervalued relative to trend | bearish momentum
• PMI Wave (Teal/Red Line):
ISM Manufacturing PMI centered at zero (raw PMI - 50, scaled ×3 for alignment).
- Positive (teal): Expansion (>50 raw) — economic tailwinds.
- Negative (red): Contraction (<50 raw) — headwinds, often linked to risk-off in assets.
• S&P 500 Momentum (White Line, Optional):
Similar deviation for SPX, showing how equities bridge BTC's volatility and PMI's smoothness.
• Divergence Highlights (Bar & Background Colors):
- Teal/Green Zones: BTC momentum positive while PMI negative → BTC signaling early recovery (potential lead by 1-3+ months at bottoms).
- Maroon/Red Zones: BTC momentum negative while PMI positive → BTC warning of rollovers (early bear signals).
- Neutral: No color — aligned cycles.
• Overlaid SMA on Price Chart:
24-month SMA for BTC (teal when price above, red when below) — quick fair value reference.
How to Interpret: Does BTC Lead the Business Cycle?
The chart flips the common meme ("No 4-year cycle, it's just the business cycle") by visually emphasising BTC's potential as a forward-looking signal.
Historical cycles (2013–2025) show:
• BTC Leads at Bottoms: E.g., 2018–2019 and 2022 troughs — BTC momentum crosses positive 2–4 months before PMI, as speculative traders price in liquidity easing/recoveries ahead of manufacturing data.
• Coincident or BTC-Led at Tops: Peaks align closely (e.g., 2017, 2021), with PMI rollovers often coinciding or slightly leading the initial BTC euphoria fade. BTC then rolls over before PMI confirms later.
• Why? Markets are anticipatory (6–12 months forward), while PMI is a lagged survey snapshot. BTC, as a high-beta risk asset, amplifies early sentiment shifts before they hit factory orders/employment.
Inputs & Customization
• BTC Source (Default: BITSTAMP:BTCUSD)
• Fair Value MA Length (Default: 24 months)
• Show S&P (Default: False)
• PMI Multiplier (Default: 3.0)
• BTC Momentum Multiplier (Default: 0.15)
• Cap BTC Momentum at ±100 (Default: True)
• Toggle Early Cross Arrows, Bar/Background Deviation Colors, Difference Histogram
Inspired by ongoing debates in crypto macro analysis (e.g., "Is there a 4-year halving cycle, or is it just the business cycle?"), it highlights potential lead-lag dynamics - challenging the popular view that PMI strictly leads Bitcoin rallies and tops.
Key Features
• BTC Momentum Wave (Yellow/Orange Line):
Detrended deviation from Bitcoin's long-term "fair value" (24-month SMA).
Formula: ((close / sma(close, 24)) * 100 - 100) * 0.15
- Positive (yellow): BTC overvalued relative to trend | bullish momentum
- Negative (orange): Undervalued relative to trend | bearish momentum
• PMI Wave (Teal/Red Line):
ISM Manufacturing PMI centered at zero (raw PMI - 50, scaled ×3 for alignment).
- Positive (teal): Expansion (>50 raw) — economic tailwinds.
- Negative (red): Contraction (<50 raw) — headwinds, often linked to risk-off in assets.
• S&P 500 Momentum (White Line, Optional):
Similar deviation for SPX, showing how equities bridge BTC's volatility and PMI's smoothness.
• Divergence Highlights (Bar & Background Colors):
- Teal/Green Zones: BTC momentum positive while PMI negative → BTC signaling early recovery (potential lead by 1-3+ months at bottoms).
- Maroon/Red Zones: BTC momentum negative while PMI positive → BTC warning of rollovers (early bear signals).
- Neutral: No color — aligned cycles.
• Overlaid SMA on Price Chart:
24-month SMA for BTC (teal when price above, red when below) — quick fair value reference.
How to Interpret: Does BTC Lead the Business Cycle?
The chart flips the common meme ("No 4-year cycle, it's just the business cycle") by visually emphasising BTC's potential as a forward-looking signal.
Historical cycles (2013–2025) show:
• BTC Leads at Bottoms: E.g., 2018–2019 and 2022 troughs — BTC momentum crosses positive 2–4 months before PMI, as speculative traders price in liquidity easing/recoveries ahead of manufacturing data.
• Coincident or BTC-Led at Tops: Peaks align closely (e.g., 2017, 2021), with PMI rollovers often coinciding or slightly leading the initial BTC euphoria fade. BTC then rolls over before PMI confirms later.
• Why? Markets are anticipatory (6–12 months forward), while PMI is a lagged survey snapshot. BTC, as a high-beta risk asset, amplifies early sentiment shifts before they hit factory orders/employment.
Inputs & Customization
• BTC Source (Default: BITSTAMP:BTCUSD)
• Fair Value MA Length (Default: 24 months)
• Show S&P (Default: False)
• PMI Multiplier (Default: 3.0)
• BTC Momentum Multiplier (Default: 0.15)
• Cap BTC Momentum at ±100 (Default: True)
• Toggle Early Cross Arrows, Bar/Background Deviation Colors, Difference Histogram
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.