Liquidity Fair Oscillator (Medium-Term)
The Medium-Term Liquidity Fair Oscillator measures Bitcoin's deviation from its liquidity-justified fair value over intermediate timeframes (weeks to months). This oscillator helps identify medium-term overvaluation and undervaluation conditions driven by liquidity cycle dynamics.
Understanding the Medium-Term Oscillator
What is Fair Value?
The oscillator calculates Bitcoin's fair value based on current global liquidity conditions using central bank balance sheets, money supply data, and credit metrics. It then measures how far the actual price has deviated from this calculated fair value. Positive oscillator readings indicate BTC is trading above fair value, while negative readings show undervaluation.
Medium-Term Timeframe
The medium-term version uses smoothing periods and lookback windows appropriate for swing traders and position traders (typically 2-8 week holding periods). This filters out daily noise while remaining responsive to meaningful shifts in the liquidity-price relationship. It's ideal for identifying multi-week trends and reversals.
Threshold Zones
The oscillator includes historical standard deviation bands that mark extreme readings. When the oscillator reaches the upper extreme, Bitcoin is significantly overvalued relative to liquidity conditions, suggesting caution. Lower extreme readings indicate attractive entry points where BTC is cheap relative to available liquidity. The zero line represents fair value equilibrium.
Trading Strategy
Position traders use this oscillator for timing medium-term entries and exits. Buying when the oscillator reaches oversold extremes (highly undervalued) and selling at overbought extremes (overvalued) provides a liquidity-aware mean reversion strategy. Divergences between price and the oscillator can signal impending trend changes before they occur in price.