How BSI Is Calculated
The signals, the logic, and the reasoning behind every reading. Understanding why the signals matter is more useful than any formula.
A Speedometer. Not a Crystal Ball.
BSI is a regime indicator — not a price prediction. It measures the current macro environment surrounding Bitcoin. A high score means conditions are favorable. A low score means conditions are working against Bitcoin. What happens to price is a separate question that BSI deliberately does not answer.
This distinction is not a disclaimer. It is the product design. A speedometer tells you how fast you are going — not where you crash. BSI tells you what the macro environment is doing right now — not what Bitcoin will do next.
BSI describes environments. It never predicts prices. Every post, every reading, every share card uses environment language — "macro is weakening" not "Bitcoin will drop." That distinction is the legal protection, the reputational protection, and the product truth all in one.
Post-2020, Bitcoin's correlation with traditional macro forces — the Dollar, Treasury yields, equity risk appetite — reached historic highs. Institutional ownership through ETFs, options markets, and corporate balance sheets means Bitcoin now moves with the same forces that move every other risk asset. Understanding those forces is no longer optional for understanding Bitcoin.
Three Steps From Raw Data to One Number
BSI takes eight macro and on-chain signals, reads each one directionally — bullish, neutral, or bearish for Bitcoin — and combines them into a single composite score from 0 to 100.
Every signal is classified as a tailwind, neutral, or headwind for Bitcoin based on its current reading. Signals in clear territory carry full weight. Signals in ambiguous or borderline territory carry reduced influence on the composite.
Each signal contributes to the composite in proportion to its importance — signals with stronger, more consistent historical relationships with Bitcoin carry more influence. All contributions are summed into a raw score.
The raw score is converted to a 0–100 scale centered at 50. A score of 50 is a perfectly neutral environment. Above 50 means the composite is net supportive. Below 50 means the composite is net negative.
Three guardrails can override the composite in specific market conditions — panic conditions, late-cycle positioning, and peak cycle territory. Each guardrail is documented in the Guardrails section below.
The 8 Signals — Relative Influence
The exact weights are proprietary and live in the app. What matters is understanding which signals drive the score and why — not the arithmetic. A single number that you can verify daily against market reality is more useful than a formula you could reconstruct but probably wouldn't.
Free signals account for the majority of the composite. The Pro signals add three institutional indicators — ETF Flows, Credit Spreads, and Fed Policy — which collectively determine whether the free reading tells the full story or a partial one. MVRV Z-Score operates as a cycle guardrail inside the model — it does not score directionally, but it dampens the composite in late and peak cycle conditions to prevent overconfident STRONG readings near historical tops.
Global M2 is displayed as a separate forward indicator strip and is not included in the composite score. Its 10–14 week lead time makes it incompatible with a real-time regime reading.
How Each Signal Is Read
Tracks the dollar's strength against a basket of major global currencies. BSI measures the direction of the dollar over approximately 60 trading days to capture structural trend rather than daily noise. A dollar that has weakened meaningfully over that window is a tailwind for Bitcoin. A dollar that has strengthened significantly is a headwind. The relationship is among the most consistent Bitcoin has shown post-2020.
The NASDAQ is the cleanest proxy for whether large institutional investors are in risk-on or risk-off mode. Since 2020, Bitcoin and tech stocks have traded in the same institutional portfolio. When portfolio managers reduce risk exposure, they sell both simultaneously. BSI reads the NASDAQ's directional trend over a 20-day window — enough to capture genuine risk-on/risk-off shifts without overreacting to single-day swings.
Rising Treasury yields increase the opportunity cost of holding risk assets — including Bitcoin. When investors can earn real returns in government bonds, the argument for holding Bitcoin weakens at the institutional level. 2022 proved this definitively: the Fed's fastest hiking cycle in 40 years drove yields sharply higher and Bitcoin lost 75% of its value. BSI reads the directional change in the 10-year yield over approximately 65 trading days.
Since ETF approval in January 2024, daily ETF flow data is the most direct measure of institutional Bitcoin demand available. When BlackRock and Fidelity are net buyers, that is real capital entering Bitcoin. When outflows dominate, institutions are distributing. No other signal has higher real-time relevance in the post-ETF era — it is the only signal that shows you exactly what institutions are actually doing, not just the conditions they are operating in.
The VIX measures expected volatility in the S&P 500. Often called the fear gauge — a calm VIX means institutions are comfortable with risk, an elevated VIX signals uncertainty across all markets. BSI uses the current VIX level without a lookback period, since fear is a present-moment condition. VIX above extreme panic levels also triggers a hard cap guardrail that overrides the composite — documented below.
The MVRV Z-Score from Glassnode measures where Bitcoin sits in its historical market cycle based on on-chain realized value vs. market value. Early cycle conditions allow the composite to read freely. Mid-cycle is neutral. Late and Peak cycle conditions trigger soft dampening guardrails that prevent the model from producing overconfident STRONG readings during historically dangerous territory — when Bitcoin has historically been approaching major tops.
The gap between high-yield corporate bond rates and government bond rates measures how much extra return institutions demand to take credit risk. Tight spreads mean confidence — institutions are comfortable. Widening spreads mean stress — institutions are worried about corporate solvency and pulling back from risk broadly. When credit spreads widen significantly, that stress inevitably reaches Bitcoin. Added in v2.1.
A simple categorical signal: is the Fed cutting, pausing, or hiking? Rate cuts historically create one of the most favorable macro environments for Bitcoin — lower rates push capital toward risk assets and reduce the opportunity cost of holding Bitcoin. Hikes do the opposite. Updated manually following each FOMC decision. The simplicity is intentional — the Fed's direction is binary enough that categorical classification outperforms any continuous metric.
BSI uses Fear & Greed backwards from most tools. Extreme Fear has historically marked near-term sentiment bottoms — when everyone is panicking, that is often where macro capitulation has occurred. Extreme Greed signals late-cycle complacency that historically precedes corrections. Weighted lowest in the composite because sentiment alone is the least reliable of all signals — macro context always outranks mood.
Regime Classification
The bands are fixed. They do not move based on market conditions, recent price action, or anything else. A 72 is always STRONG. A 43 is always WEAK. Stability in the thresholds is what makes the reading trustworthy over time.
Seven Timeframe Architecture
BSI runs seven simultaneous timeframes using exponential moving average smoothing. Shorter timeframes react quickly to new signal data. Longer timeframes filter that noise and show the structural regime underneath. Use the timeframe that matches your question.
Model Controls and Safety Limits
BSI has three documented guardrail mechanisms. They exist because a naive composite can produce misleading readings during specific market conditions — periods where the math would tell you one thing and reality is screaming something else entirely.
When the market is in genuine panic — the fear gauge has spiked to crisis levels and institutions are simultaneously pulling money out of Bitcoin ETFs — no composite score should read STRONG regardless of what other signals say. This is a binary condition that requires a binary response. The two-condition gate prevents false triggers from a single signal spiking in isolation.
Late cycle conditions have historically preceded corrections in every Bitcoin cycle. When on-chain data signals that Bitcoin is entering late-cycle territory, all positive composite contributions are moderately dampened. The score can still read STRONG during late cycle — it just requires more signal alignment to get there. This is not a ceiling; it is a calibration that reflects the elevated risk environment.
Peak cycle is the most dangerous period for model overconfidence. MVRV Z above the historical peak threshold has marked bubble territory in every major Bitcoin cycle. Stronger dampening than late cycle reflects the elevated risk. A STRONG reading during peak cycle requires exceptional across-the-board signal alignment — appropriately rare when history says Bitcoin is in bubble territory.
Rescaling the displayed score to make the distribution appear wider was considered and permanently rejected. The displayed score always equals the calculated score. Indices maintain numerical integrity. If the distribution is too centered, the correct fix is weight recalibration — not display manipulation.
Historical Validation — 11 Years
This is a model reconstruction backtest — not a live track record. The model was applied to historical data after the outcomes were known. This is the industry standard methodology for validating new indices before launch, used by Bloomberg, S&P, and all major index providers. It is not a guarantee of future performance. The live track record begins March 15, 2026 — documented in the public reading log on this website.
The chart above shows three outputs from the 11-year backtest. Top panel: BSI score (7-day average, orange) overlaid on BTC price (log scale, blue) — color bands show which macro regime dominated each period. Middle panel: annual zone distribution — the percentage of days BSI spent in each regime per year. Bottom panel: BTC excess returns by BSI zone vs the unconditional 90-day baseline of 23.6%. When BSI reads STRONG or MAX, BTC has historically outperformed baseline. When BSI reads WEAK, BTC has historically underperformed. This is not a prediction — it is a description of what the historical record shows.
During periods when BSI read STRONG or MAX, Bitcoin's 90-day returns exceeded the unconditional baseline by +16.2% to +22.7%. During WEAK periods, Bitcoin underperformed by −17.4% on a 90-day basis. The ETF Approval vertical line (Jan 10, 2024) marks the structural break point — after which institutional rotation became the dominant driver of Bitcoin's macro environment. Four specific periods from the post-ETF era are documented below.
STRONG during ETF rally ✓ · MODERATE during consolidation ✓ · STRONG during Fed cut rally with Late Cycle dampening active ✓ · WEAK during correction ✓ · Live track record begins March 15, 2026. Every official print logged publicly at bitcoinstrengthindex.com — timestamped, verified, permanent.
Where BSI Falls Short
BSI is a useful tool for understanding Bitcoin's macro environment. It is not infallible, not perfectly calibrated, and not a replacement for your own research. Use it as one data point among many. The fact that we document these limitations publicly — before critics found them — is part of what makes BSI trustworthy.
Model Version History
| Version | Change | Severity |
|---|---|---|
| V-01 | EMA alpha values corrected — were inverted in original model | CRITICAL |
| V-02 | Signal weight rationale documented for all signals | CRITICAL |
| V-03 | Fear & Greed weight reduced — sentiment signal weighted down relative to macro signals | HIGH |
| V-04 | Extreme regime diminishing returns multiplier added | HIGH |
| XR-1 | Free/Pro score gap disclosure label added when tiers diverge materially | CRITICAL |
| XR-2 | Global M2 removed from composite — Forward Indicator strip only | CRITICAL |
| XR-4 | Panic Override VIX trigger threshold tightened | HIGH |
| V-13 | Credit Spreads added as 10th signal — FRED API · all weights renormalized | HIGH |
| V-14 · v2.2 | Late Cycle and Peak Cycle hard caps replaced with soft dampening multipliers. Panic Override hard cap retained. Display rescaling permanently rejected. | CRITICAL |
IMPORTANT DISCLAIMER
Bitcoin Strength Index (BSI) is a relative macro strength indicator. It measures the current macro environment surrounding Bitcoin — not future price direction.
BSI is not investment advice. BSI is not a price prediction. BSI is not a trading signal. BSI does not tell you to buy or sell Bitcoin.
Past regime readings do not guarantee future price performance. A STRONG macro environment does not mean Bitcoin will rise. A WEAK macro environment does not mean Bitcoin will fall. The index describes conditions — not outcomes.
Bitcoin Strength Index LLC · Palmer, Alaska · bitcoinstrengthindex.com · [email protected]