ALT resilient Index
Last updated
Last updated
The ARI (ALT Resilient Index) is designed to identify relatively safe entry points during market downturns by analyzing the behavior of altcoins compared to Bitcoin.
Core Concept
When Bitcoin (BTC) experiences significant declines but altcoins (ALT) do not follow suit with proportional drops, it often signals a short-term stabilization point. This phenomenon occurs because altcoins are generally more sensitive to selling pressure during market corrections. When the market begins to stabilize, market makers start accumulating the altcoins they previously sold, resulting in a rebound in the ALT/BTC ratio.
The ARI measures the willingness of market makers to absorb selling pressure during extreme market conditions. A higher ARI value indicates a stronger commitment by market makers to support prices, which often coincides with a market bottom.
1. Using ARI as a Standalone Entry Signal
ARI is particularly effective during sharp corrections within bullish market trends, where Bitcoin often experiences drops exceeding 10-20%. During such corrections, the ARI indicator helps identify entry points with higher safety margins.
Example:
Point A: BTC correction due to "sell the news" after ETF approval.
Point B: Market turmoil caused by the intensifying Israel-Hamas conflict.
Point C: Japanese central bank's interest rate hike, triggering global financial turbulence.
At each of these events, ARI highlighted relatively low-risk entry points during market fear.
The ARI can be used alongside the LIQ (Liquidity Index) to filter entry signals during volatile markets.
Example: During the Bank of Japan's unexpected rate hike (July 31), Bitcoin dropped rapidly from 67K to 58K. The LIQ indicator generated an entry signal (yellow box), but the price continued to fall to a low of 49K. By incorporating ARI (orange box) as an additional filter, the safety margin of the entry was significantly improved.
Strengths
Effective during sharp corrections: The ARI excels in identifying safe entry points when the market experiences significant pullbacks.
Limitations
Limited Trading Opportunities: With a benchmark set at 3, ARI signals may trigger infrequently. Users can combine ARI with other indicators to maximize its utility.
Not Guaranteed to Pinpoint Absolute Lows: While ARI reflects the willingness of market makers to absorb selling pressure, it does not account for all market-driving factors. For example: January 2024: During a "sell the news" event for Bitcoin, ARI triggered, but BTC still declined by over 10%. However, in hindsight, the ARI signal still indicated a solid entry zone.
The ARI indicator is a valuable tool for identifying high-safety-margin entry points during major corrections. While it excels in specific scenarios, combining it with other indicators like LIQ can enhance its effectiveness and mitigate its limitations. Users should always evaluate market dynamics holistically and recognize that no single indicator can account for all variables in the highly volatile crypto market.
