Macro Chain Index (MCI)
The Macro Chain Index is a composite indicator that combines eight weighted macroeconomic factors to assess the overall macro environment for cryptocurrency markets.
Understanding the Macro Chain Index
What is the Macro Chain Index?
The Macro Chain Index (MCI) is a comprehensive indicator that tracks the macro environment by combining eight normalized components with different weights based on their relative importance to cryptocurrency markets. The index ranges from 0 to 1, where higher values indicate more favorable macro conditions.
Component Breakdown
The MCI consists of the following weighted components:
- Normalized Inverted DXY (2.70): US Dollar strength - inverted so weakness is positive
- Normalized USBCOI/ISM PMI (2.70): Manufacturing activity and economic health
- Normalized Fed Balance Sheet (1.50): Federal Reserve's balance sheet size and monetary expansion
- Normalized Inverted MOVE (1.50): Bond market volatility - inverted so lower volatility is positive
- Normalized BDI (1.50): Baltic Dry Index measuring global shipping activity
- Normalized USOIL (1.30): Crude oil prices reflecting energy costs
- Normalized Liquidity Measure (1.0): Overall market liquidity conditions
- Normalized Inverted BAMLEMCBPIOAS (1.0): High yield credit spreads - inverted so tighter spreads are positive
RSI and Momentum Signals
The MCI uses a smoothed RSI (39-period with 16-period smoothing) and a 36-period RSI moving average to identify momentum shifts. Crossover signals are generated when the RSI crosses above (bullish) or below (bearish) its moving average, appearing as vertical lines on the Bitcoin price chart.
How to Use This Indicator
Composite Index Levels: Values above 0.5 generally indicate favorable macro conditions, while values below 0.5 suggest challenging conditions. The index tends to lead or coincide with major Bitcoin price movements.
RSI Crossovers: Bullish crossovers (green vertical lines) occur when RSI crosses above its moving average, suggesting improving momentum. Bearish crossovers (red vertical lines) suggest weakening momentum. These signals work best when confirmed by the absolute MCI level.
Component Analysis: The middle chart shows all eight normalized components as dotted lines. Observing which components are driving the composite index can provide insights into the nature of the macro environment.
Signal Interpretation
Bullish Signals:
- MCI rising above 0.5 with improving trend
- RSI crossing above its moving average (green vertical line)
- Multiple components trending higher simultaneously
Bearish Signals:
- MCI falling below 0.5 with deteriorating trend
- RSI crossing below its moving average (red vertical line)
- Multiple components trending lower simultaneously
Neutral/Caution:
- MCI oscillating around 0.5 without clear direction
- RSI and RSI MA converging or overlapping
- Mixed signals from individual components
Important Notes
The Macro Chain Index is a comprehensive macro indicator that should be used in conjunction with other technical and on-chain indicators. Macro conditions can remain favorable or unfavorable for extended periods, so timing market entries and exits based solely on MCI levels should be done with caution. The indicator is most effective for identifying major macro regime changes rather than short-term trading signals.