Bitcoin “Reserve Risk” Metric Approaches All-Time Lows
28 Juni 2022 - 9:00PM
NEWSBTC
Data shows the Bitcoin “reserve risk” indicator has recently
plunged down and is now reaching all-time lows only seen back in
2015 bear and the March 2020 COVID crash. Bitcoin Reserve Risk
Suggests HODLing Relative To Price Is Strong According to the
latest weekly report from Glassnode, BTC investors have been
holding strong onto their coins despite the large decline in the
crypto’s price recently. Before looking at what the “reserve risk”
indicator does, it’s best to get an understanding of a couple
concepts first. A “coin day” is accumulated in the market for each
1 BTC that stays unmoved for a day. The sum of such coin days in
the entire market can tell us about how dormant the long-term
holder supply has been. Because of this, the sum of coin days can
be an effective way of measuring the conviction of hodlers in the
Bitcoin market. However, there is another way to interpret the coin
days and hence the LTH conviction; as Glassnode explains: Stronger
hands will resist the temptation to sell and this collective action
builds up an ‘opportunity cost’. Every day HODLers actively decide
NOT to sell increases the cumulative unspent ‘opportunity cost’
(called the HODL bank). The other idea of interest here is the
incentive that these LTHs have to sell right now. It is measured
through the current price of Bitcoin. Whenever the price goes up,
hodlers become increasingly tempted to realize their profits, and
hence the incentive to sell goes up. Related Reading | First
In History: Bitcoin Mayer Multiple Records Lower Value Than Last
Cycle’s Low Now, the reserve risk models the ratio between this
“incentive to sell” and the cumulative “opportunity cost”
(explained above) of the long-term hodlers. Below is the chart for
the indicator. The value of the indicator seems to have sharply
declined recently | Source: Glassnde's The Week Onchain - Week 26,
2022 As you can see in the above graph, the Bitcoin reserve risk
has gone down in recent days and is now approaching all-time lows.
This suggests that despite the plunging price of the coin during
2022, BTC investors have still been holding strong onto their
coins. Related Reading | Bitcoin Monthly Tags Lower Bollinger
Band, Tool’s Creator Hints At Bottom The last time such low values
of the metric were observed was back in the late 2015 bear market
and the March 2020 crash. BTC Price At the time of writing,
Bitcoin’s price floats around $20.9k, down 1% in the past week.
Over the last month, the coin has lost 27% in value. The below
chart shows the trend in the value of the crypto over the past five
days. Looks like the price of BTC has been consolidating sideways
recently | Source: BTCUSD on TradingView Featured image from
Kanchanara on Unsplash.com, charts from TradingView.com,
Glassnode.com
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