TOTAL3ES/ETH Mean Reversion

The TOTAL3ES/ETH Mean Reversion tool analyzes the market capitalization ratio between altcoins (TOTAL3 excluding stablecoins) and Ethereum to identify cyclical valuation extremes and potential portfolio rebalancing opportunities.

Usage

The indicator is designed to be used on the ratio chart of CRYPTOCAP:TOTAL3ES / CRYPTOCAP:ETH. It helps traders determine market cycles by identifying when altcoins are potentially overextended or undervalued relative to Ethereum.

• Extreme High Zone (Red): When the ratio enters the upper shaded area (default > 80% of historical range), it suggests altcoins may be overvalued compared to ETH.
• Extreme Low Zone (Green): When the ratio enters the lower shaded area (default < 20% of historical range), it suggests ETH may be overvalued relative to the broader altcoin market.
• Parity (1.0): This level represents the point where the combined market cap of altcoins equals that of Ethereum.
• Midpoint (2.065): Acts as a historical magnet for mean reversion over long-term cycles.

Details

This script operates on fixed historical parameters derived from the performance of the crypto market since 2017. The range is defined between 0.64 (2017 low) and 3.49 (all-time high). The tool calculates "Reversion Pressure" by measuring the current ratio's distance from the historical midpoint, providing a quantitative look at how overextended the current market phase might be.

Settings

Display

• Show Reversion Zones: Toggles the visibility of the red (bearish) and green (bullish) extreme areas.
• Show Midpoint: Displays the historical center line at 2.065.
• Show Parity Line: Shows the 1.0 reference line where altcoins and ETH have equal market weight.
• Zone Transparency: Adjusts the opacity of the shaded extreme regions.

Calculation

• Reversion Strength Period: Sets the moving average period used to determine reversion signal timing.
• Extreme Threshold (0-1): Defines the percentage of the historical range that constitutes an "extreme" zone (e.g., 0.8 represents the top and bottom 20% of the range).

FAQ

How do I access TOTAL3ES/ETH Mean Reversion?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

Which chart should I use this on?

This indicator is built specifically for the TOTAL3ES/ETH ratio. It will display a runtime error if applied to other tickers.

What does "Parity" mean in this context?

Parity refers to the 1.0 level. When the ratio is above 1.0, altcoins (excluding stablecoins and ETH) have a higher cumulative market cap than Ethereum. When below 1.0, Ethereum is larger than the combined altcoin market.