Bitcoin “Reserve Risk” Metric Approaches All-Time Lows

Keshav Verma

1 year ago

3 mins read

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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.

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.

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

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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