Bitcoin: Reserve Risk
Reserve risk shows us the risk-reward balance which correlates to the confidence and conviction of long-term holders. The ratio between the current price of the coin (intention to sell) and the reaction of long-term holders (opportunity cost of not selling).
When Reserse Risk is LOW, means that HODLer conviction is high and they refused to spend their coins, therefore it is a good time for investment. However, when the high reserve risk gives us a signal of increased incentive of sell.
By looking at the picture below, we see that every bull peak shows us the incentive to sell the coin, more people are selling into the market strengths. In plain, the periods of overvaluation are usually short when long-term holders gain some profits by spending their coins.
While bear market traders show bear behaviour and this period lasts longer where people accumulate coins, periods of undervaluation usually happen in the second half of the bear market.
As shown on the picture above, strong hands still hodl their coins and refuse to sell. Consider current short term bear period as a strategic profit taken by smart money.
When Reserse Risk is LOW, means that HODLer conviction is high and they refused to spend their coins, therefore it is a good time for investment. However, when the high reserve risk gives us a signal of increased incentive of sell.
By looking at the picture below, we see that every bull peak shows us the incentive to sell the coin, more people are selling into the market strengths. In plain, the periods of overvaluation are usually short when long-term holders gain some profits by spending their coins.
While bear market traders show bear behaviour and this period lasts longer where people accumulate coins, periods of undervaluation usually happen in the second half of the bear market.
As shown on the picture above, strong hands still hodl their coins and refuse to sell. Consider current short term bear period as a strategic profit taken by smart money.
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