Karma Index

What Is the Karma Index?

The Karma Index is a comprehensive indicator designed to identify cyclical market tops and bottoms in cryptocurrency trading. It combines data from various sources, including:

• Spot market liquidity

• On-chain metrics

• Off-market sentiment

• Exchange traffic

• Derivatives market data

By quantifying these factors, the Karma Index provides a reliable tool for traders to pinpoint the relative highs and lows of major market cycles.

The Challenge: Defining Highs and Lows

The fundamental strategy for success in trading is “buy low, sell high.” However, determining what constitutes “low” and “high” is the core challenge for any trader.

In an upward-trending market, each cycle tends to establish higher lows and higher highs.

• Low points are defined as cycle bottoms, where sentiment is excessively bearish.

• High points are cycle tops, characterized by market euphoria.

As the saying goes:

“Buy when there’s no interest, sell when there’s a frenzy.”

Yet, these psychological turning points are notoriously difficult to act upon due to fear at the bottom and greed at the top.

Features of the Karma Index

The Karma Index stands out for its dual strengths:

1. Cyclical Awareness: Accurately identifies the larger market cycles.

2. Precision: Generates clear buy and sell signals that outperform other mainstream indicators.

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How to Use the Karma Index

The Karma Index is optimized for long-term cycle analysis, focusing on major market movements.

• Macro Cycle: The 2019–2021 Bull-Bear Cycle During this cycle, even with the March 12, 2020, event, there was no panic selling of holdings. Instead, positions were steadily held until reaching the phase high in 2021.

• Within-Cycle: Accumulation Opportunities in the 2019–2021 Bull-Bear Cycle Point B was a low in the Karma Index during this cycle and corresponded to Point A, which had the same Karma Index value. Afterward, BTC reached new highs. Looking back, Point B was at the tail end of consolidation following the May 19 crash, making it an excellent entry point.

• Macro Cycle: The 2022–2024 Bull-Bear Cycle The FTX bankruptcy event in November 2022 caused BTC to drop to a cycle low of 16K. During this period, the Karma Index provided a clear entry signal, enabling holders to ride the trend steadily to the phase high of 73K.

• Within-Cycle: Accumulation Opportunities in the 2022–2024 Bull-Bear Cycle Point B was a low in the Karma Index during this cycle and corresponded to Point A, which had the same Karma Index value. Afterward, BTC reached new highs. Looking back, Point B was precisely at the starting point of the Q4 bull market, making it an excellent entry point.

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Cyclical Nature

• The green arrows in the historical chart represent buy signals, typically occurring at global cycle bottoms.

• The red arrows indicate sell signals, correlating with cycle peaks.

• The pattern demonstrates that frequent buy signals tend to align with bottoming phases, while sell signals coincide with market tops, validating the cyclical reliability of the index.

Precision Backtesting the Karma Index against other popular cyclical indicators—AHR999 and Crypto Greed & Fear Index—reveals its superior accuracy in buy/sell signals.

Allocate 10% of capital on each buy signal, Close 50% of positions on each sell signal.

Backtesting Results: Karma Index vs. Other Indicators

Indicator	ROI	MDD (Max Drawdown)
Karma Index	1917.4%	62.5%
AHR999	478.7%	35.4%
Crypto Greed & Fear	54.2%	71.5%

• ROI (Return on Investment): The Karma Index delivered a staggering 1917.4%, far exceeding other indicators.

• MDD (Max Drawdown): While slightly higher than AHR999, the Karma Index maintained a tolerable drawdown, outperforming Crypto Greed & Fear significantly.

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Disclaimer

Thank you for using CoinKarma. The data provided is based on historical performance and cannot guarantee future market trends. The cryptocurrency market is highly volatile. Users must assess risks and bear responsibility for their decisions.