# AltcoinEra Momentum Index — Methodology

**Version 0.1 (Draft) · 28 June 2026**

> This document defines the rules for a transparent, fully rules-based crypto index. Every weight in the index is determined by the formulas below — there is no discretionary management. All parameters marked *(calibrate)* are starting points to be fixed against historical Bitcoin-dominance ranges before launch, and should be set loosely and thesis-driven rather than curve-fit to any single past cycle.
>
> This is not investment advice. The index can lose value. Smart-contract, liquidity, and signal risk are described in Section 11.

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## 1. Objective

The AltcoinEra Momentum Index (working name; ticker TBD) provides single-token, on-chain exposure to large-cap crypto that **rotates between a Bitcoin core and an altcoin sleeve (Ethereum and all other eligible names) based on the trend in Bitcoin dominance (BTC.D)**.

The thesis is trend-continuation, not prediction: when capital is rotating *out* of Bitcoin and into alts (dominance trending down), the index increases alt exposure to ride that confirmed rotation; when capital flees to Bitcoin (dominance trending up), it retreats to the core. A single contrarian overlay — described in Section 7 — raises a stablecoin buffer at cycle-euphoria extremes, the one move a static market-cap index structurally cannot make.

The index is implemented as a Reserve Decentralized Token Folio (DTF) on BNB Smart Chain, holding constituents as freely-transferable Binance-Peg BEP-20 tokens, fully collateralized and redeemable at NAV.

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## 2. Index Universe & Constituent Selection

### 2.1 Base universe
Start from the top 20 cryptocurrencies by market capitalization, **excluding**:
- Stablecoins;
- Wrapped or pegged assets (e.g. a wrapped BTC alongside BTC) — to avoid double-counting;
- Assets with limited investability (material litigation risk, legal restrictions, or insufficient circulating liquidity).

This mirrors the established large-cap index convention.

### 2.2 BSC investability filter (the binding constraint)
A base-universe asset is **eligible** only if it also has:
- A canonical, freely-transferable BEP-20 representation on BNB Smart Chain (Binance-Peg or equivalent — no transfer whitelist, no freeze authority, exposes `decimals()`, not ERC-777); **and**
- On-chain depth above the liquidity floor: minimum **$2M DEX liquidity** and **$500k average daily on-chain volume** over the trailing 30 days *(calibrate)*.

Assets that qualify by market cap but fail this filter (for example, tokens native to their own L1 with no liquid BSC wrapper) are **excluded**, and their weight is redistributed across the eligible set. This filter is the hard ceiling on the index: it can only hold what is actually tradable on-chain at size.

### 2.3 Resulting investable set
The filters typically yield 12–18 eligible names. This set is reviewed monthly (Section 9).

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## 3. Sleeve Structure

Eligible constituents are partitioned into two sleeves:

| Sleeve | Members |
|---|---|
| **Core** | BTC only |
| **Alt** | ETH and all other eligible constituents |

The momentum signal sets the **split between sleeves**. Weighting *within* each sleeve is fixed by rule (Section 8). A third, conditional **Stable** buffer is introduced only by the euphoria overlay (Section 7).

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## 4. The Momentum Signal: Smoothed Bitcoin Dominance

### 4.1 Definition
- **BTC.D (ex-stables)** = BTC market cap ÷ (total crypto market cap − total stablecoin market cap).
- Stablecoins are removed from the denominator so that stablecoin inflows/outflows do not mechanically distort the signal.

### 4.2 Smoothing
- **D̄ = 14-day exponential moving average of BTC.D (ex-stables)** *(calibrate; 14-day balances responsiveness against noise at a biweekly cadence)*.
- The index acts on **D̄**, never on the raw daily print.

### 4.3 Source & reproducibility
The signal is computed from a public, citable data source (e.g. a market-cap data provider's dominance series, ex-stablecoins). The exact source, field, and computation are published so any holder can independently reproduce D̄ for any date.

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## 5. Regime Bands → Target Sleeve Split

The smoothed dominance level **D̄** maps to a target core/alt split. As dominance trends down, alt exposure rises (momentum: ride the confirmed rotation); as it trends up, the index retreats to core.

| Regime | D̄ (BTC.D ex-stables) | Target Core | Target Alt |
|---|---|---|---|
| Bitcoin strongly dominant | > 62% | 75% | 25% |
| Bitcoin-leaning | 55–62% | 65% | 35% |
| Balanced | 48–55% | 50% | 50% |
| Alts trending (altseason) | < 48% | 35% | 65% |

*All band edges are illustrative and must be calibrated to real historical dominance ranges before launch. Bands should be set wide and thesis-driven; do not tune them to fit a single past cycle.*

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## 6. Hysteresis (Dead-Band): The Anti-Whipsaw Rule

Band membership alone would cause flip-flopping when D̄ hovers on a boundary. To prevent this:

1. **Entry margin.** The index moves to an adjacent band only when D̄ crosses the boundary by at least **1.5 percentage points** beyond it *(calibrate)*.
2. **Confirmation.** The cross must still hold at the **next** scheduled biweekly evaluation. A single reading that reverts does not trigger a trade.
3. **Inside the band = no trade.** While D̄ stays within the current band (net of the margin), weights are left to drift naturally; no rebalance is executed.

Effect: the index responds when dominance genuinely changes regime, and stays silent through ordinary weekly chop — capturing the responsiveness of a frequent cadence with turnover closer to a handful of rotations per year.

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## 7. Euphoria De-Risk Overlay (the one contrarian rule)

Independent of the dominance bands, the index raises a defensive stablecoin buffer at cycle-top extremes. This is the asymmetric protection a static market-cap index cannot perform.

**Trigger** — either condition:
- Bitcoin MVRV Z-Score ≥ **6.0** *(calibrate to historical top zone)*; **or**
- Pi Cycle Top indicator fires (111-day MA crosses above 2× 350-day MA).

**Action when triggered** — override the Section 5 split with a defensive posture regardless of the dominance band:

| | Core | Alt | Stable buffer |
|---|---|---|---|
| Euphoria / cycle-top defensive | 60% | 10% | 30% *(calibrate)* |

The Stable buffer holds a single high-quality, freely-transferable stablecoin on BSC. The overlay releases (returning control to Section 5) once **both** top signals have normalized (MVRV-Z below threshold **and** Pi Cycle no longer active), subject to the same confirmation rule as Section 6.

These signals are already part of the AltcoinEra quant toolkit; their precise definitions and data sources are published alongside the dominance signal.

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## 8. Within-Sleeve Weighting

### 8.1 Core sleeve (BTC)
The Core sleeve holds Bitcoin only; it receives the full core allocation set by the regime bands. Ethereum is weighted within the Alt sleeve under 8.2.

### 8.2 Alt sleeve (ETH + alts)
Market-cap weighted across eligible alts — Ethereum included — subject to a **per-asset cap of 20% of the sleeve** *(calibrate)*. Weight above the cap is redistributed pro-rata to uncapped alts. Because Ethereum is typically the largest alt, the cap ordinarily binds on ETH, which both preserves genuine breadth and keeps a single name from turning the sleeve into a market-cap echo.

### 8.3 Stable buffer
When active (Section 7), held in a single named stablecoin; not market-cap weighted.

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## 9. Rebalancing: Cadence & Procedure

| Action | Frequency |
|---|---|
| Constituent review (which names are eligible per Section 2) | Monthly — 1st, 00:00 UTC |
| Signal evaluation (D̄ band, dead-band, euphoria overlay) | Biweekly — 1st & 15th, 00:00 UTC |

A rebalance is **executed only if** one or more of the following is true at an evaluation point; otherwise no trade occurs and weights drift:
- A confirmed dominance band cross (Sections 5–6);
- A monthly change in the eligible constituent set;
- The euphoria overlay engaging or releasing (Section 7).

Limiting trades to genuine regime/constituent changes — rather than rebalancing on every date — is what keeps turnover and slippage low in shallow on-chain liquidity.

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## 10. Execution & Operational Model

1. **Compute (off-chain).** A signal engine reads the public data, computes D̄, the active band, the dead-band state, and the euphoria triggers, and derives target weights from Sections 5–8.
2. **Publish.** The signal values, the resulting target weights, and the decision (trade / no-trade) are written to a public, timestamped log **before** execution. This is what makes the index auditable and reproducible rather than a black box.
3. **Submit.** The published target weights are submitted to the Reserve Folio by the index's auction approver / rebalance manager (a multisig). The methodology defines the weights; the multisig only executes the published result.
4. **Settle.** Reserve's on-chain Dutch auctions source liquidity from DEXs and solver networks to move the basket to target with minimized slippage and MEV.

Mint and redemption remain permissionless and continuous at NAV throughout; rebalancing changes target weights, not the redeemability of the token.

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## 11. Risk & Limitations

- **Momentum is structurally late.** By design the index confirms a trend before acting. It will give back some gains at reversals and will be slow to re-enter alts at a major bottom (where dominance is still high). This lateness is an accepted trade-off for avoiding value traps.
- **Liquidity ceiling.** The investable universe and the achievable size are capped by on-chain Binance-Peg depth, which is a fraction of each asset's true market cap. Faithful weights tap shallow pools; large AUM widens tracking error.
- **Turnover cost.** Rotations trade the alt sleeve through thin pools; each executed rebalance incurs slippage. The dead-band and conditional-execution rules exist to minimize this, but cannot eliminate it.
- **Residual whipsaw.** Hysteresis reduces but does not remove the chance of entering a regime that promptly reverses.
- **Signal limitations.** BTC dominance can shift structurally for reasons unrelated to the BTC/alt cycle (e.g. growth of stablecoins — mitigated here by the ex-stables definition — or large new categories entering the market cap base). The four-year cycle assumptions underlying the bands may weaken or break; bands are deliberately loose for this reason.
- **Overfitting.** Tightly tuning bands or thresholds to past cycles is explicitly avoided. Past performance of any calibration does not guarantee future behavior.
- **Smart-contract & custody risk.** Funds depend on the Reserve Folio contracts and on the integrity of the Binance-Peg wrappers held in the basket.
- **Not a regulated fund / not advice.** The index is published as a transparent, mechanical ruleset. It is not investment advice and confers no guarantee of return.

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## 12. Governance & Change Control

- **Rules vs execution are separated.** This document is the rule set. Execution is performed by a multisig that submits the *published* output of these rules and has no discretion to alter weights.
- **Versioning.** Every change to this methodology increments the version number and is recorded in a public changelog with its effective date.
- **Advance notice.** Material methodology changes (band edges, signal definition, thresholds, eligibility rules) are announced ahead of their effective date so holders can react before they take effect.
- **No mid-period discretion.** Parameters are not changed in response to a single period's performance. Calibration changes, if any, follow the versioning and notice process above.

Maintaining this separation and this paper trail is what distinguishes a credible rules-based index from an actively managed fund — operationally, reputationally, and in how the product is characterized.

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## 13. Definitions

- **BTC.D (ex-stables):** Bitcoin's share of total crypto market capitalization, with stablecoins removed from the total.
- **D̄:** the 14-day EMA of BTC.D (ex-stables); the value the index acts on.
- **Core sleeve:** BTC.
- **Alt sleeve:** ETH and all other eligible constituents (everything except BTC).
- **Dead-band / hysteresis:** the margin-plus-confirmation rule that prevents trading on noise.
- **MVRV Z-Score / Pi Cycle Top:** on-chain Bitcoin cycle indicators used solely as the euphoria de-risk trigger.
- **DTF (Decentralized Token Folio):** Reserve's on-chain index structure — a single token fully backed by a redeemable basket.

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*End of methodology v0.1 (draft). Parameters marked (calibrate) must be fixed against historical data before launch.*