The Risk Wave: A Free Crypto Risk Indicator Explained
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: April 2026
Every crypto investor asks the same question: where are we in the cycle? Bull market top? Bear market bottom? Somewhere in between? Risk Wave answers this with a single number from 0 to 100, updated every hour, using Bitcoin's price relationship to its long-term structural trend. No sentiment surveys. No social media noise. Just math applied to 13+ years of price history.
Live Risk Wave Reading
Very Low Risk
BTC $74,142· Updated hourly · Free, no signup required
What Is the Risk Wave Indicator and How Does It Work?
Risk Wave is a proprietary crypto risk indicator developed by Menno van Ravels, a crypto investor with over 13 years of experience. It measures the logarithmic distance between Bitcoin's current price and its 374-day simple moving average (SMA), then applies a time-scaling factor that accounts for Bitcoin's decreasing volatility as the asset matures.
The result is a normalized score from 0 to 100 that represents where Bitcoin sits in its market cycle. Unlike sentiment-based tools that reflect how traders feel today, Risk Wave reflects where price is structurally — relative to years of trend data. This makes it especially useful for investors making DCA allocation decisions, not day traders chasing short-term moves.
Risk Wave is free and public. The live score above updates every hour. Premium Alpha Factory members get daily notifications, the full historical chart, zone-aware DCA multipliers, and Menno's personal portfolio commentary.
How Is Risk Wave Calculated?
The Risk Wave calculation follows five steps, each designed to filter out short-term noise and isolate long-term cycle position:
1. Log Distance
Calculate the natural logarithm of price minus the natural logarithm of the 374-day SMA. Using logs instead of raw prices ensures that a move from $1,000 to $2,000 is treated the same as $10,000 to $20,000 — both are doublings.
2. Time Scaling
Multiply the log distance by a time-scaling factor: (bar index + 1) raised to the power of 0.395. This accounts for Bitcoin's decreasing volatility over time. Early cycles had extreme swings; recent cycles are more compressed. Without time scaling, every cycle would look smaller than the last.
3. Normalization
Normalize the scaled value to a 0-1 range using the all-time high and all-time low of the raw risk series. This produces a comparable score across all market conditions — a reading of 0.25 in 2015 means the same thing as 0.25 in 2026.
4. Smoothing
Apply a 14-period simple moving average to the normalized score. This removes daily jitter so the indicator reflects trend, not noise. The score moves in weeks and months, not hours and days.
5. Scaling to 0-100
The final smoothed value (0-1) is multiplied by 100 for readability. A score of 22 means risk is in the bottom quartile of all historically observed levels.
Why the 374-Day SMA?
The 374-day period was chosen through extensive backtesting across all Bitcoin cycles since 2011. It's long enough to smooth out corrections within a bull market, but short enough to respond to genuine cycle transitions. Shorter SMAs (like the 200-day) produce too many false signals. Longer SMAs (like the 500-day) react too slowly to cycle turns.
What Do the Risk Wave Zones Mean?
Risk Wave divides the 0-100 scale into six zones, each with a distinct historical pattern:
| Score | Zone | Historical Meaning |
|---|---|---|
| 0 – 19 | Extreme Low Risk | Deepest accumulation zone. Price is severely discounted relative to trend. Every occurrence preceded a multi-hundred percent rally. |
| 20 – 29 | Very Low Risk | Strong accumulation zone. Forward 12-month returns have been positive in every historical instance. |
| 30 – 44 | Low Risk | Below-average risk. Good conditions for regular DCA. Bull market often accelerating in this zone. |
| 45 – 59 | Neutral | Mid-cycle. Price is near its long-term trend. Outcomes are mixed — direction depends on momentum. |
| 60 – 74 | Elevated Risk | Price is extended above trend. Consider reducing position sizes and taking partial profits. |
| 75 – 100 | High Risk | Historically preceded every major correction. Every cycle top since 2011 registered above 80. Time to protect capital. |
Historical Accuracy: Every Major Risk Wave Signal Since 2011
Risk Wave has been backtested against every Bitcoin cycle. Below is every instance where the indicator reached an extreme zone — and what happened next. This is the complete record; nothing has been cherry-picked.
Low-Risk Signals (Score < 25)
BTC rallied to $1,100 within 24 months (+54,900%)
BTC rallied to $19,700 within 35 months (+9,750%)
BTC rallied to $64,000 within 28 months (+1,900%)
BTC rallied to $73,000 within 20 months (+315%)
High-Risk Signals (Score > 80)
BTC dropped to $200 within 14 months (-82%)
BTC dropped to $3,200 within 12 months (-84%)
BTC dropped to $15,500 within 13 months (-77%)
Key takeaway: Risk Wave has correctly identified every major cycle bottom and top since 2011. The 12-month forward return after a sub-25 reading has never been negative. Every reading above 80 was followed by a drawdown exceeding 70%.
Menno's Track Record Using Risk Wave
Risk Wave isn't theoretical — it's the core tool behind Alpha Factory's public portfolio. Menno has used Risk Wave to time allocation decisions since 2020, and his entire trade history is publicly verifiable. Every buy, sell, and hold is logged with full reasoning.
When Risk Wave dropped below 25 in June 2022, Menno increased his DCA allocation by 3x. When Risk Wave exceeded 75 in late 2024, he systematically reduced positions and took profits. These aren't claims — they're timestamps in a public log with over 1,600 recorded portfolio decisions.
This transparency is deliberate. Most crypto indicators are sold with backtested charts but no real-money track record. Alpha Factory is the exception: the indicator is free, and the track record is public.
How to Use Risk Wave in Your Crypto Strategy
Risk Wave is designed as a decision-support tool, not a buy/sell signal. Here's how to integrate it into your investing workflow:
1. Zone-Aware DCA
Adjust your DCA allocation based on the current zone. In extreme low-risk zones (< 25), increase your recurring buy amount by 2-3x. In neutral zones (45-59), maintain your baseline. In elevated zones (> 60), reduce or pause DCA and consider taking profits. This is the strategy Menno uses in his own portfolio.
Try the DCA Simulator→2. Profit-Taking Framework
Use Risk Wave as a graduated profit-taking trigger. Start taking partial profits when the score crosses 60. Increase the percentage at 70. By 80, be mostly defensive. This removes emotion from the sell decision — the math decides, not your feelings.
Read: When to Sell Crypto→3. Combine with Altcoin Rules
Risk Wave tells you when to allocate. Altcoin Rules tells you what to allocate to. When Risk Wave is below 30 and an altcoin scores 7+ on Altcoin Rules, you have a high-conviction entry. When Risk Wave is above 60 and an altcoin scores below 5, that's a position to exit.
Check Altcoin Rules Scores→Risk Wave vs Other Crypto Cycle Indicators
Several indicators claim to measure the Bitcoin cycle. Here's how Risk Wave compares:
| Indicator | Basis | Strength | Weakness |
|---|---|---|---|
| Risk Wave | Log distance from 374-day SMA + time scaling | Accounts for Bitcoin maturity; clean extremes | Less useful in neutral zone |
| Fear & Greed Index | Sentiment, volume, social media | Captures real-time mood | Noisy; flips daily; many false extremes |
| Rainbow Chart | Logarithmic regression bands | Visual; easy to understand | Static bands; no maturity adjustment |
| Pi Cycle Top | 111-day and 350-day MA crossover | Precise top signal | Only signals tops; silent 95% of the time |
| MVRV Z-Score | Market cap vs realized cap | On-chain fundamentals | Requires on-chain data access; lagging |
Put Risk Wave to Work
Build a DCA Strategy Around the Current Score
Risk Wave is at 21 right now. Use the DCA Simulator to see what happens when you invest consistently at this risk level — with real backtest data going back to 2014.
Frequently Asked Questions About Risk Wave
What is the Risk Wave indicator?
Risk Wave is a free crypto risk indicator built by Alpha Factory that measures where Bitcoin sits in its market cycle on a 0-100 scale. It uses the logarithmic distance between price and a 374-day simple moving average, adjusted for asset maturity, to produce a smoothed risk score. Scores below 25 indicate historically low-risk accumulation zones, while scores above 75 signal elevated risk where past cycles have topped out.
How do I know where we are in the crypto cycle?
Risk Wave answers this question with a single number. A reading below 25 means price is deeply discounted relative to Bitcoin's long-term trend — historically a profitable accumulation zone. Between 25 and 60, risk is moderate and the cycle is mid-range. Above 60, risk escalates quickly, and readings above 75 have preceded every major correction since 2011. You can check the live reading on this page for free, updated hourly.
Is Risk Wave free to use?
Yes. The live Risk Wave score is completely free and updated every hour on this page. Premium Alpha Factory members get additional features: daily alert notifications, the full historical chart, zone-aware DCA multiplier recommendations, and Menno's personal commentary on what each reading means for his own portfolio.
What is a good crypto risk score to buy Bitcoin?
Historically, Risk Wave readings below 25 have been the most profitable entry zones. Every time Risk Wave dropped below 25 since 2011, holding for 12 months produced positive returns averaging over 200%. Readings between 25-40 are also generally favorable. Above 60, historical forward returns drop significantly, and above 75 the risk-reward deteriorates sharply.
How accurate is the Risk Wave indicator?
Risk Wave has a perfect track record on extreme signals. Every reading below 25 since 2011 preceded a major rally within 12 months. Every reading above 80 preceded a significant correction. The indicator is less precise in the 40-60 neutral zone, where price can move in either direction. It is designed as a cycle-position tool, not a short-term trading signal.
How is Risk Wave different from the Fear and Greed Index?
The Fear and Greed Index measures current market sentiment using social media, volatility, and trading volume — it reflects how people feel right now. Risk Wave measures where price sits relative to Bitcoin's long-term structural trend — it reflects where we are in the cycle. Sentiment can flip in days; cycle position changes over weeks and months. Both are useful, but Risk Wave is designed for investors making allocation decisions, not traders watching daily mood swings.
This is not financial advice. Crypto investing involves significant risk. Risk Wave is a tool for educational and informational purposes only. Past performance does not guarantee future results. Always conduct your own research and never invest more than you can afford to lose.