Indicator Overview

This indicator applies an entropy-based framework to market price behaviour, providing a normalised measure of disorder within price movement distributions. By assessing the variability and unpredictability of returns over a rolling window, it captures the balance between structured, trend-driven environments and chaotic, volatility-dominated conditions. Unlike traditional volatility tools, this approach using core physics principles to contextualise the degree of randomness in market dynamics rather than simply the size of price moves.

How To Use

Entropy values above 0.8 (white line) signal high disorder, often associated with volatile, unpredictable markets, suggesting caution or short-term trading opportunities. Values below 0.4 indicate low entropy, reflecting structured trends or calm periods, ideal for trend-following strategies or accumulation. The blue gradient line visualises entropy levels, with darker shades indicating lower entropy. Traders can use rising entropy to anticipate choppy conditions and declining entropy to position for emerging trends. Investors may reduce exposure during high-entropy phases and increase holdings in low-entropy periods to align with Bitcoin’s cyclical market patterns.