Bitcoin Liquidity Flow Index (LFI) Fair Value Model
A quantitative valuation framework that determines Bitcoin's fair value based on global liquidity conditions, utilizing sophisticated statistical modeling to identify overvalued and undervalued market conditions.
Model Overview
Model Design
The system analyzes the relationship between Bitcoin price and global liquidity flows through a 6-year calibration window, capturing complete market cycles including major stress events like the COVID-19 crash. This timeframe was specifically selected after identifying a structural regime change in late 2017 when institutional infrastructure emerged.
Interpretation
The model expresses Bitcoin's current position relative to fair value in standard deviations (σ), with confidence bands representing statistical probability ranges. Values within ±1σ are considered normal market behavior, while movements beyond ±2σ signal extreme conditions historically associated with major tops or bottoms.
Application
This tool is particularly useful for identifying potential turning points in Bitcoin cycles, as extreme deviations from the model often coincide with major market inflection points.