Karma Index
Last updated
Last updated
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 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.
The Karma Index stands out for its dual strengths:
Cyclical Awareness: Accurately identifies the larger market cycles.
Precision: Generates clear buy and sell signals that outperform other mainstream indicators.
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.
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.
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.
