What is a risk metric?

A risk metric scores how cheap or expensive an asset is right now relative to its own long-term trend, on a simple 0–1 scale. A reading near 0 means the price is historically low (an accumulation zone); a reading near 1 means it is historically high (a distribution zone). It turns a noisy price chart into one comparable number you can track over time and across assets.

How it is calculated

CycleBottom derives the risk metric from the logarithmic deviation of price from its 365-day simple moving average, normalized to 0–1:

1. Compute the 365-day simple moving average (MA) of daily price.
2. Take the log-deviation: d = ln(price) − ln(MA).
3. Apply an optional diminishing-returns adjustment: adjusted = d × index^factor (so later cycles aren’t perpetually “extreme”).
4. Normalize to [0, 1] using cumulative min–max scaling over all history to date.

Because scaling is cumulative, the metric only uses information available up to each date — it never “looks ahead” — so historical readings are a fair reflection of what the score would have shown at the time.

How to read the scale

• 0.00–0.15 — Extreme low risk, strong accumulation zone
• 0.15–0.30 — Low risk, good accumulation opportunity
• 0.30–0.45 — Moderate-low risk, reasonable entry
• 0.45–0.55 — Neutral, fair-value range
• 0.55–0.70 — Moderate-high risk, consider caution
• 0.70–0.85 — High risk, distribution zone
• 0.85–1.00 — Extreme high risk, historically overvalued

Crypto, indices, and forex

Crypto and stock indices trend upward over long horizons, so a diminishing-returns factor (≈0.395 for crypto, ≈0.2 for indices) keeps the newest cycles from being rated permanently extreme. Forex pairs are mean-reverting, so they use the raw log-deviation with no adjustment.

See it live

Check the current reading for Bitcoin, all crypto, stock indices, or read about the cycle-bottom detector.