Bitcoin Optix

Smart Money Confidence is a model that aggregates indicators reflecting sentiment among investors that tend to use the stock market to hedge underlying positions. Or, they're just contrarian investors who prefer to sell into a rising market and buy into a declining one.

Time Frame: Short-Term | Update Schedule: Daily | Source: SentimenTrader

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Construction:

The Optimism Index (Optix) is based on data including:

Future volatility expectations
Average discount of the fund to its NAV
Price behavior

Each measure is ranked against its historical norms to determine whether or not the current level is at an extreme, then totaled to come up with an overall score. The Optix can go from 0 (maximum pessimism) to 100 (maximum optimism), though it generally stays above 20 and below 80. As with most contrary indicators, when sentiment gets extremely pessimistic, below 30, we would become alert to a possible reversal to the upside as expectations improve from very low levels. When sentiment is very high, above 70, then we would become concerned about a correction as expectations may have gotten too optimistic.

For bitcoin, the Optimism Index has worked best when using a moving average, such as 10 days.

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