Regime Classification

How the composite score maps to five distinct market regimes.

Overview

After computing the four pillar scores and combining them into a final score (−10 to +10), that score is classified into one of five regimes. Each regime has a defined score range, a trading bias, and a position sizing implication.

Regime thresholds

≥ +5.0 → RISK-ON

≥ +2.0 → CAUTIOUS-BULL

≥ −2.0 → NEUTRAL

≥ −5.0 → CAUTIOUS-BEAR

< −5.0 → RISK-OFF

Hysteresis: A 0.5-point dead-band prevents regime flipping at boundaries. The score must cross a boundary by at least 0.5 to trigger a change. This eliminates whipsaw during choppy markets.

The Five Regimes

RISK-ON

Score ≥ +5.0

Characteristics

· Strong market sentiment (Fear & Greed 61–90)
· Significant ETF inflows and/or rising stablecoin supply
· Healthy funding rates: not overleveraged
· Low liquidation activity, calm derivatives markets

Bias

Strongly bullish

Position

Full long exposure

Approach

Buy dips, ride trends

Historical example

January 2024: ETF launch drove massive institutional inflows, sentiment elevated but not extreme. BTC rallied from $40k to $73k with all pillars confirming.

CAUTIOUS-BULL

Score +2.0 to +4.9

Characteristics

· Bullish price sentiment but some divergences appearing
· Liquidity flows positive but slowing or mixed
· Funding rates elevated: longs accumulating leverage
· Moderate liquidation spikes possible

Bias

Cautiously bullish

Position

Reduced long exposure

Approach

Take profits on rallies, tighten stops

Historical example

March 2024 near $73k ATH: sentiment extreme, ETF flows slowing, funding rate very elevated. Regime signaled fragility before the correction to $60k.

NEUTRAL

Score ≥ −2.0 and < +2.0

Characteristics

· Mixed or indeterminate signals across pillars
· ETF flows flat, stablecoin supply stable
· Funding rates near zero: balanced positioning
· No clear directional bias in derivatives

Bias

Neutral

Position

Minimal exposure

Approach

Preserve capital, wait for breakout

Historical example

Summer 2023: BTC range-bound $25k–$30k for months, mixed liquidity, no catalyst. Regime stayed NEUTRAL until the ETF approval narrative shifted flows.

CAUTIOUS-BEAR

Score ≥ −5.0 and < −2.0

Characteristics

· Bearish sentiment: Fear & Greed declining
· ETF outflows or stablecoin contraction
· Rising liquidation cascade ratios
· Funding rates negative: shorts building

Bias

Bearish

Position

Flat or small short

Approach

Avoid longs, sell rallies

Historical example

May 2022 LUNA collapse: liquidation cascades spiking, ETF flows (pre-launch era: exchange outflows), sentiment crashing. Regime signaled bearish before the full drop to $17k.

RISK-OFF

Score < −5.0

Characteristics

· Extreme fear in sentiment index
· Sustained heavy ETF outflows
· Liquidation cascade ratios at extreme levels (>3×)
· Large negative OI changes: capitulation deleveraging

Bias

Strongly bearish

Position

Flat or short

Approach

Capital preservation, wait for capitulation

Historical example

November 2022 FTX collapse: extreme liquidations, massive exchange inflows (distribution), sentiment at 5 (extreme fear). Regime signaled RISK-OFF at the bottom, then CAUTIOUS-BULL after the -2.0 crossing as shorts overextended.

7D vs 30D Alignment

Both timeframes use the same regime thresholds, but different liquidity windows. Compare them to gauge conviction level.

7D Regime	30D Regime	Interpretation
RISK-ON	RISK-ON	High conviction: sustained bull market. Size up.
RISK-ON	CAUTIOUS-BULL	Recent momentum in a positive trend. Constructive.
CAUTIOUS-BULL	RISK-ON	Trend intact but near-term weakness. Take some profits.
RISK-ON	NEUTRAL	Breakout attempt from consolidation. Wait for 30D to confirm.
NEUTRAL	NEUTRAL	Range-bound. Preserve capital, wait for resolution.
CAUTIOUS-BEAR	RISK-OFF	Downtrend accelerating. Stay fully defensive.

Key principles

→ Regime classification describes the current state, not a prediction of what comes next.
→ Combine with the Macro Context layer to set position sizing conviction.
→ Regime changes lag market turns slightly by design. Confirmation is more useful than false precision.
→ When 7D and 30D agree, confidence is highest. When they diverge, the market is in transition. Reduce size.

← Scoring Formulas Macro Context →