The Basics

The PS Crypto Money Flow indicator visually represents how different cryptocurrency classes perform relative to each other. By understanding these dynamics, traders can make informed decisions about portfolio rebalancing, risk management, and spotting potential trends.

Visual Elements

When you apply the indicator to a TradingView chart, you’ll see four lines, each representing the normalized market cap value of BTC, ETH, Alts, and Stables over time:

1. BTC Line (Orange): Represents the market cap growth of Bitcoin.
2. ETH Line (Gray): Represents the market cap growth of Ethereum.
3. Alts Line (Fuchsia): Represents market cap growth of the top 125 Altcoins.
4. Stables Line (Green): Represents market cap growth of 5 Stablecoins.

Interpreting the Interplay Between Assets

1. Typical Market Rotation

Below is a depiction of the typical rotation in the crypto market. Recognizing when this is occurring can help ensure you are appropriately positioned.

• Rotation into BTC: In the first left segment, BTC increases while others decrease. This may mean people are increasing BTC exposure in preparation for a more significant market move and are testing the waters with a safer, lower-risk cryptocurrency.
• Rotation from BTC to Alts: In the second segment, the BTC line flattens and then declines while the ETH and Alts lines rise. This suggests a rotation from Bitcoin into riskier cryptocurrencies with increased potential gains in Altcoins and might signal the start of an 'alt season.’
• Flight to Safety: In the third segment, a sharp rise in the Stables line indicates a flight to safety, where investors liquidate riskier altcoins assets in favor of Stablecoins, the safer option for value preservation.

2. Correlation and Divergence

• Correlated Movements: Sometimes, all lines may move in the same direction, indicating a robust overall market trend and increased market participants.
• Divergence: If one asset class diverges significantly from others, it signals that specific factors are influencing that class. For instance, regulatory news might impact ETH differently from BTC.

3. Leading and Lagging Indicators