Bitcoin Power Law Deviation Z-Score

Introduction While standard price charts show Bitcoin's exponential growth, it can be difficult to gauge exactly how "overheated" or "cheap" the asset is relative to its historical trend.

This indicator strips away the price action to visualize pure Deviation. It compares the current price to the Bitcoin Power Law "Fair Value" model and plots the result as a normalized Z-Score. This creates a clean oscillator that makes it easy to identify historical cycle tops and bottoms without the noise of a log-scale chart.

How to Read This Indicator The oscillator centers around a zero-line, which represents the mathematical "Fair Value" of the network.

• 0.0 (Center Line): Price is exactly at the Power Law fair value. Positive Values (+1 to +5): Price is trading at a premium. Historically, values above 4.0 have coincided with cycle peaks (Red Zones).
• Negative Values (-1 to -3): Price is trading at a discount. Historically, values below -1.0 have been excellent accumulation zones (Green/Blue Zones).

The Math Behind the Model This script uses the same physics-based Power Law parameters as the popular overlay charts:

• Formula:Price = A * (days since genesis)^bSlope (b): 5.78
• Amplitude (A): 1.45 x 10^-17

The "Z-Score" is calculated by taking the logarithmic difference between the actual price and the model price, divided by a standard scaling factor (0.18 log steps).

How to Use

1. Cycle Analysis: Use this tool to spot macro-extremes. Unlike RSI or MACD which reset frequently, this oscillator provides a multi-year view of market sentiment. Confluence: This tool works best when paired with the main "Power Law Rainbow" chart overlay to confirm whether price is hitting major resistance or support bands.

Credits Based on the Power Law theory by Giovanni Santostasi and Corridor concepts by Harold Christopher Burger.

Disclaimer This tool is for educational purposes only. Past performance of a model is not indicative of future results. Not financial advice.