Glassnode’s On-chain indicator “HODLer Reservation Risk” has just hit its lowest point ever. The recent collapse of FTX, one of the world’s leading crypto exchanges, has ushered in a new era of crypto trading. The Reserve Risk indicator dropped to a record low of 0.000729, before recovering to just above 0.0010.
Glassnode describes Reserve Risk as a tool to measure the conviction of long-term holders in relation to the cryptocurrency’s value. It is a long-term cyclical oscillator that models the correlation between the current market price (incentive to sell) and the opportunity cost of not selling (long-term investor confidence).
The HODL Bank Index, which tracks the amount of unspent money, can be used to illustrate the conviction of long-term buyers. The Reserve Risk is calculated by dividing the current market value of Bitcoin by the HODL Bank Index.
An analyst in the crypto space recently commented on the bullish on-chain indicators, including the Reserve Risk indicator. “The conviction among long-term Bitcoin holders can’t get any better than this,” they said.
What Does the High Reserve Risk Rating Mean for BTC Price?
The recent surge in Bitcoin’s price has naturally been accompanied by a rise in the Reserve Risk rating. Historically, the fall of the Reserve Risk indicator after reaching low levels has coincided with the start of the latest Bitcoin bull markets. This appears to have been the case in 2020, 2019, 2015, and late 2011, at least.
The historical data implies that the future could see an increase in demand for Bitcoin. The Reserve Risk indicator can be added to a list of other indicators that display long-term bullish buying signals.
CryptoQuant’s Profit and Loss (PnL) ratio, an indicator constructed from three on-chain metrics related to Bitcoin, recently rose above its 365-day Simple Moving Average (SMA) after a prolonged period of being below it. “The CQ PnL Index has given a definitive buy signal for BTC,” CryptoQuant said. “The index crossover has implied the start of bull markets in past cycles.”
Glassnode’s “Bear Recovery” dashboard, which tracks eight pricing models, network usage, market profitability, stability of wealth indicators, and market profitability, suggests that Bitcoin could be in the early stages of a bear market recovery. Meanwhile, analysis of Bitcoin’s long-term market cycles also suggests that the world’s largest cryptocurrency by market capitalization could be in the early stages of a nearly three-year bull market.
Bitcoin’s Stock-to-Flow pricing model, which is widely followed, supports the idea that Bitcoin is in the early stages of a long-term bull market. According
Between “dips and falls.” halving”: Bitcoin’s The cycle of halving happens every four years. It is the point where the mining remuneration has been cut in half. This will reduce inflation. Bitcoin. The past is worth looking at when it comes to Bitcoin’s The 2024 halving will bring about another major surge.
But First… Macro Risks
The past year has seen a great increase in the number of people investing in Bitcoin, especially with its 40% increase in value. But traders have a big week of macro events, a lot of which could bring about short-term volatility. To make it through before declaring victory in the new bull market,
The Federal Reserve will make its last policy announcement Wednesday prior to the ECB & BoE Thursday. This is before the official US jobs report was released on Friday in January. This week’s US ISM PMI, JOLT and earnings from US tech giants will be worth monitoring.
Will The Fed Make The Bull Run End?
The main event will be, of course. Fed meeting. The interest of the US central bank will be increased by 25 bp Wednesday. The fed funds goal will be raised to 4.50-4.75%. SubsequentlyA 25bp hike in rates is not expected to shock markets and should not be considered a bearish move. What investors are worried about is the rate outlook for interest.
More Specifically, how many more hikes will there be? And How long will the final rate stay in effect? Market Pricing appears to indicate that, after Wednesday’s The hike Fed will only raise rates again (in March) and then begin cutting rates by the end of 2023.
That It looks to be based mainly on the belief that 1) US inflation, which is wage and price pressures, will continue to move closer to the Fed’s 2.0% goal and some more) The US will enter a recession by the end of this year, which implies that the Fed will have room. and the need to lower interest rates in order to support the economy.
But Investors are underestimating the Fed’s It determination to raise interest rates and keep them in tightening ranges for longer. According To the popular pseudonymous macrofocused Twitter account The Carter, Goldman Sachs”US” Financial Conditions Index The (FCI) level is at its lowest point since September 2005.
The Carter believes that “there will be blood on February 1st”With Fed Chairman Jerome Powell To “reset financial conditions by firmly confronting rate cuts (i.e. rate cut bets)… head on”. That would hit crypto hard, at least in the short term (a possible 10% drop?).
Other strategists agree. The head of treasury at crypto asset management firm Wave Financial, Nauman Sheikh, told crypto press that “there is a strong possibility that at the press conference, Powell will be more aggressive and tighten financial conditions again.” “If this is the case, we could see a positive short-term correction in cryptocurrencies as well as all risk assets.