Stablecoin Dominance Oscillator

3 days ago

The SDO is a normalized oscillator that tracks the relationship between stablecoin market capitalization (USDT + USDC + DAI) and total crypto market capitalization. It helps identify periods where stablecoins represent an unusually high or low portion of the total crypto market value.


Key components:

Main Signal (Blue Line):

Shows the normalized deviation of stablecoin dominance from its trend. Higher values indicate higher stablecoin dominance relative to history (which often corresponds with market bottoms/fear), while lower values indicate lower stablecoin dominance (often seen during strong bull markets/greed).


Dynamic Bands (Gray):

These adapt to market volatility, expanding during volatile periods and contracting during stable periods
Generally suggest temporary boundaries for the oscillator


Volatility Reference (Purple Line):

Shows the ratio between short-term and long-term volatility
Higher values indicate more volatile market conditions
Helps contextualize the reliability of the current signal



The indicator uses a 500-period lookback for baseline calculations and a 15-period Hull Moving Average for smoothing, making it responsive while filtering out noise. The final signal is normalized and volatility-adjusted to maintain consistent readings across different market regimes.