The Alpha Factory Risk Wave: Methodology

Risk Wave is an oscillating indicator that measures the risk of an asset based on movement, speed, direction, and more. That is the short definition — short because short definitions do the most work. It is a 0-to-100 score (with a mirrored low-side extension that can dip into negative readings at deep cycle lows) that tells me where the asset sits inside its own cycle, not where it sits against a headline.

The point of the indicator is narrow. It is not a trading signal. It is not a sentiment gauge. It does not try to predict next week's price. It tries to answer one question: is the market in a stretched, neutral, or compressed part of its cycle right now? When it is compressed, history has rewarded patience and accumulation. When it is stretched, history has rewarded discipline and trimming. Almost everything else is noise around that one question.

I am Menno van Ravels. I have been in crypto since 2013, survived three bear markets, and built Alpha Factory as the place I wished I had found when I started. Risk Wave is the indicator I use to size my own conviction. Everything below is what I am willing to put in public about how it works, where it has landed on record, and what it does not do well. Parts of the recipe are proprietary. The track record is not.

One more thing before the detail. This is a methodology page, not a marketing page. I have tried to keep the claims inside what the indicator has actually done on record, date-stamped against Bitcoin prices anyone can verify on a chart. If a section reads plainer than a typical crypto-site landing page, that is on purpose. Plain prose is harder to hide behind.

What the indicator listens to

Risk Wave synthesizes several categories of market information. It listens to price momentum — how fast and how far price has moved relative to its own long-term structure. It listens to volatility regimes — whether the market is compressing into a coil or already discharging energy. It listens to trend geometry — the distance between price and the slower averages that define a cycle's spine. And it listens to structural breadth signals across the broader market, because Bitcoin rarely tops or bottoms in isolation.

Those categories are the honest answer to what the indicator "uses." The specific mix — which inputs, which weights, which thresholds decide when one signal overrides another — is proprietary. That is a deliberate choice. Every time I have seen a public indicator disclose its full recipe, the recipe stopped working within a cycle, either because it was front-run or because the author had to keep tweaking it in public. Risk Wave has held up across four cycles partly because it is not a recipe anyone can copy-paste into TradingView.

What I can say without reservation is this: Risk Wave is math, not mood. There is no survey data inside it, no social sentiment score, no news sentiment layer. Fear & Greed and Risk Wave answer different questions and both have their place, but Risk Wave does not move because Twitter is loud.

One practical consequence of that design: Risk Wave and a sentiment gauge can disagree, and when they have disagreed the disagreement has usually been informative. A market that felt euphoric but sat inside a structurally neutral Risk Wave reading has been a different animal than a market that was euphoric on top of a score already above 80. The combination of "mood is hot" and "structure is hot" has been the more dangerous one historically.

The formula (what I will and will not publish)

I will not publish the math. The specific weighting is proprietary. What you need to understand is how the number moves, not the equation behind it.

When the asset has pulled meaningfully below its own long-term trend, when momentum has cooled off, and when the breadth of the broader market has compressed, Risk Wave drops. When the opposite happens — price extended above trend, momentum hot, breadth stretched — Risk Wave climbs. That symmetry is the entire intuition. The score tracks how hot or cold the cycle is, not how hot or cold price is in isolation.

The score is smoothed to prevent day-to-day whipsaws. That is why Risk Wave has rarely flipped from low to high in a single week — and why, when it has signalled a transition, it has tended to mean something.

A fair criticism here is that refusing to publish the formula makes the indicator harder to falsify. I accept that. The answer I can offer is the next section: every dated reading below is on the record, attached to a Bitcoin price that cleared or did not clear. If Risk Wave had a bad track record, this page is where you would catch it.

Where Risk Wave has landed, on the record

The table below is the short version of the Risk Wave track record. Every row is a dated reading I have previously committed to publicly on this site. I am restating them here in one place because that is what a methodology page is for: readers should be able to check me.

Two things worth sitting with in that table. First, the four deepest low-risk readings — November 2011, January 2015, December 2018, June 2022 — each preceded multi-hundred-percent forward returns within three years. Second, the three highest readings — November 2013, December 2017–January 2018, November 2021 — each preceded drawdowns between 77% and 84% within 14 months. The extremes have done most of the work.

The middle of the range has been less decisive. That is by design, and it is the most important thing to understand about Risk Wave before trying to use it.

A note on the readings that fall inside a cycle rather than at its ends. Summer 2021 and November 2024 are both in the table, and neither was a cycle low or a cycle top. They are there because they show a useful pattern: when Risk Wave sat deep in the low zone during a mid-cycle shakeout, the cycle had further to run. Investors who read those readings as "the cycle is not over" rather than "price cannot fall from here" were rewarded. That distinction matters. Risk Wave is an answer to the question "where are we in the cycle" — it is not an answer to the question "what does price do next week."

Where Risk Wave is weak

Work in progress — founder review pending

No indicator is perfect. Risk Wave is less precise in the 40-60 neutral zone, where price can move in either direction and the signal honestly does not have a strong opinion. That is not a bug I have tried to engineer out. A tool that tries to be confident in every market regime is a tool that lies.

Early exits at extreme readings have historically cost 10-15% of upside. When Risk Wave has crossed into the high-risk band and I have trimmed, price has occasionally continued climbing for another leg before the cycle topped. The trade-off was asymmetric enough that I kept making it — leaving 10% on the table was preferable to watching 60% of gains evaporate in the drawdown that followed — but it is the most common, most honest complaint about the indicator and I am not going to pretend it does not happen.

There have also been stretches where price fell while Risk Wave stayed low. Summer 2021 is the cleanest example: Bitcoin dropped from roughly $64K to $29K, and Risk Wave did not move into the high zone on that sell-off. Anyone who read the low reading as "therefore price cannot fall from here" was wrong in the short term. Anyone who read it as "the cycle is not over" was proven right inside a few months. That is the correct way to read low readings — as a statement about cycle position, not about next week's price.

A note on what is still missing from this section. Per the 2026-04-17 founder input survey (question B5), I owe this page one or two dated examples of specific Risk Wave calls that were wrong — not just regime caveats, but named readings that did not play out as I expected. Those examples are mine to supply and will be added in a follow-up revision rather than fabricated here.

A third category of weakness worth naming: asset coverage. Risk Wave was built against Bitcoin first, because Bitcoin has the longest, cleanest price history and the most stable structural behaviour across cycles. Applying the same framework to newer altcoins — some of which have only existed through a single bull market — is genuinely harder. The indicator is available on more coins for members, but I am more confident in the Bitcoin track record than I am in any altcoin reading, and a careful reader should be too.

How to think about each band

Risk Wave is a cycle-position tool, not a buy/sell signal. The language below describes how I have personally thought about each range over the past decade. It is educational context, not a recommendation to buy, sell, or hold anything.

• 0-30 — Extreme fear / accumulation zone. Historically, readings in this band have been the deepest accumulation windows of each cycle. Forward 12-month returns following sub-25 readings have not been negative at any point in the recorded series. That is a historical pattern, not a promise about the future.
• 30-70 — Neutral / mixed signal. The middle of the range. Price can move in either direction and the indicator does not have a strong opinion. This is the zone where discipline around an existing plan has mattered more than tactical decisions based on the score itself.
• 70-80 — Caution / consider trimming. Price has stretched above its long-term structure. Every time Risk Wave has pushed into this band historically, the risk/reward has deteriorated meaningfully. I have personally used readings in this range as a prompt to review position sizing and think about partial profit-taking on my own book.
• 80+ — Danger zone. Every cycle top on record — 2013, 2017–2018, 2021 — produced a Risk Wave reading above 80 at or near the peak. I treat this band as the most asymmetric warning the indicator produces.

A short note on how these bands connect to time horizon. Risk Wave was designed for investors thinking in quarters and years, not in days. The historical forward-return data behind sub-25 readings measured 12-month outcomes. The drawdown data behind above-80 readings measured 12-14 months from the reading to the cycle low. If a reader is trading a one-week view, Risk Wave is the wrong tool. If a reader is allocating capital across a full cycle, it has held up across every one I have lived through.

The framework I use on my own book

To be clear on what this section is and is not: the points below describe actions I have taken on my own portfolio, published transparently on this site. They are educational statements about personal discipline, not signals or recommendations for readers. Nothing on this page tells anyone to buy or sell.

• When Risk Wave has dropped below 25, I have historically increased my DCA allocation rather than paused it. In June 2022, I tripled it.
• When Risk Wave has climbed above 75, I have reduced position sizes and raised my cash allocation in stages rather than all at once.
• In the 40-60 neutral band, I have defaulted to whatever my existing plan was. I do not tactical-trade the middle of the range and I do not encourage anyone else to.
• I have never published a "sell" call. I publish my own trims and my own adds, on my own book, and I let readers decide what to do with that information. Only my own discipline is on the record — everyone else's plan is their own.

Where to go next

• /risk-wave — live Bitcoin Risk Wave score, updated hourly.
• /crypto-risk-index — market-wide risk composite across 50+ assets.
• /bitcoin-risk — Bitcoin-specific risk context and cycle framing.
• /guides/risk-wave-crypto-risk-indicator — the long-form pillar guide with zone tables and FAQ.

In closing

Risk Wave is one tool in a larger system. It tells me where the cycle is. It does not tell me which coin to hold, how much to hold, or how to size against the rest of my life. I treat it as the first question I ask — cycle position — and the other tools on this site answer the questions that come after. The reason this page exists at all is simple: if I am going to publish a score that influences how people think about risk, the methodology should be legible, the track record should be verifiable, and the limitations should be named. That is the standard I want my own writing held to. This page is an attempt to meet it.

If this page ever gets something wrong — a dated reading that does not match the historical chart, a claim that has aged poorly, a limitation I did not own up to — I would rather hear about it than not. The point of publishing a methodology is accountability. A methodology page that never gets corrected is usually not a methodology page, it is a brochure. Treat this one as a living document. I plan to.