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 – 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. This sum can be used to determine how long-term the holder supply is.
This is why the sum of coin day can be used to determine the guilt of hodlers within the Bitcoin market.
Glassnode, however, explains that there’s another way to interpret coin days and therefore the LTH conviction.
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).
Another idea is that LTHs must sell now to earn interest. The current Bitcoin price is the measure of it.
The price of goods and services goes up. Hodlers feel more inclined to profit, so the temptation to sell increases.
Similar Reading: First in History: Bitcoin Mayer multiple records Lower than the Low of Last Cycle| 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. Here is the chart.
Source: Glassnde's The Week Onchain - Week 26, 2022| Source: Glassnde's The Week Onchain - Week 26, 2022
The graph above shows that the Bitcoin reserve risk is on the decline and now stands at all-time lows.
These numbers suggest that, despite the drop in the price of Bitcoin during 2022 it has been held on by BTC investors.
Bitcoin Monthly Tags Lower Bollinger Band, Tool’s Creator Hints At Bottom| Bitcoin Monthly Tags Lower Bollinger Band, Tool’s Creator Hints At Bottom
This metric was last used in such low levels during the 2015 bear market, and then again after the March 2020 crash.
BTC Prices
At the time of writing, Bitcoin’s price floats around $20.9k, down 1% in the past week. Bitcoin’s price has fallen 27% in the last month.
This chart displays the trends in cryptocurrency’s value for the last five business days.
BTC price seems to have been consolidating recently -- Source: BTCUSD at TradingView| Source: BTCUSD on TradingView
Featured Image from Kanchanara, Unsplash.com. Charts from TradingView.com and Glassnode.com.