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Description

Reserve Risk is an indicator that measures the confidence of long-term holders relative to the current price of Bitcoin. It reflects the balance between price and conviction. A low Reserve Risk value suggests high confidence among long-term holders while the asset is undervalued. Conversely, a high Reserve Risk value suggests low confidence during periods of elevated price, indicating increased speculative risk. Reserve Risk is designed to identify optimal periods for capital deployment based on long-term holder sentiment. Historically, periods of low Reserve Risk have been associated with outsized long-term returns, while periods of high Reserve Risk have preceded market corrections or sustained downtrends. Coverage is currently available for Bitcoin (BTC) only.

Use Case

Reserve risk can help traders understand when it is a good time to buy and researchers to analyze the confidence of long-term holders.

Methodology

Reserve Risk = Price / HODL Bank HODL Bank = cumulative sum(price - median value of Coin Days Destroyed)