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A Glassnode on-chain indicator of Bitcoin HODLer confidence called “Reserve Risk” recently dropped to an all-time low, indicating that HODLer confidence has reached a record high. Following the collapse of FTX, formerly one of the world’s largest centralized cryptocurrency exchanges, the Bitcoin Reserve Risk Index has fallen to his lowest ever of 0.000729. It has since recovered to just above 0.0010.
According to Glassnode, reserve risk is “used to assess long-term holders’ confidence in the native coin’s price at any point in time.” Reserve risk is “a long-term cyclical oscillator that models the ratio between current prices (incentives to sell) and long-term investor beliefs (opportunity cost of not selling).”
Long-term investors’ beliefs are summarized in Glassnode’s ‘HODL Bank’ index. This represents the accumulation of unused “opportunity costs” that occur the longer the HODLer refuses to sell. Reserve risk is therefore defined as the current Bitcoin market price divided by his HODL bank index score.
Glassnode states that the risk/reward of investing in Bitcoin is attractive when trust is high and BTC price is low (low reserve risk score). On the other hand, in the opposite scenario where confidence is low and price is high (i.e. high risk reserve score), risk/reward is unattractive.
According to one crypto analyst who recently commented on a number of bullish on-chain indicators, including the risk reserve indicator, “there is no greater certainty among long-term Bitcoin holders”.
What does the recent risk reserve bounce mean for BTC price?
In light of the recent rise in Bitcoin price, the Risk Reserve Score has naturally increased. Historically, bottoming out after the risk reserve indicator reached depressed levels coincided with the start of a new Bitcoin bull market. At least that’s how it seemed in 2020, 2019, 2015 and he was in late 2011.
Historically, the risk reserve has shown that bitcoin’s price could rise exponentially over the next few years.The risk reserve indicator flashes bullish long-term buy signals other lists You can also add to
of CryptoQuant The Profit and Loss (PnL) Index, a metric composed of three on-chain indicators related to the profitability of the Bitcoin market, recently dropped below the 365-day Simple Moving Average (SMA) after falling below the 365-day Simple Moving Average (SMA). ). “The CQ PnL Index gave his BTC a definitive buy signal,” CryptoQuant noted, adding that “an index crossover suggests the start of a bull market in the past cycle.” .
Meanwhile, as discussed in a recent article, the metrics tracked in Glassnode’s “Recovery from Bitcoin Bear” dashboard (eight pricing models, network utilization, market profitability, balance of wealth, The growing number of confluences of (examine) suggests that Bitcoin may be among them. Early stages of recovery from a bear market.
Elsewhere, an analysis of Bitcoin’s long-term market cycle also suggests that the world’s largest cryptocurrency by market capitalization may be in the early stages of a nearly three-year bull market. According to analysis by the crypto-focused Twitter account @CryptoHornHairs, Bitcoin is following exactly the path of a nearly four-year market cycle that has now been fully respected for over eight years.
Moreover, the widely-held Bitcoin pricing model tells a similar story. According to Bitcoin’s Stock-to-Flow pricing model, Bitcoin’s market cycle is about four years, and prices typically bottom out near the middle of his four-year gap between “halvings.” increase. Bitcoin halving is his quadrennial phenomenon. The mining reward will be halved, thus lowering the Bitcoin inflation rate. Past price history suggests that Bitcoin’s next big rally will come after the next halving in 2024.
But before that… macro risk
Optimism that Bitcoin has bottomed out has grown significantly since the beginning of the year, especially as the price of Bitcoin climbed about 40%. But traders have a big week of macro events, many of which could trigger short-term volatility, before they can declare victory that a new bull market is here.
The Federal Reserve Board Latest Policy Announcement On Wednesday, ahead of the ECB and BoE on Thursday and ahead of the release of the official January US jobs report on Friday. This week’s US ISM PMI survey and JOLT data are also worth noting.
Will the Federal Reserve Ruin the Bullish Party?
The main event, of course, is the Fed meeting. The US Central Bank is widely expected to raise interest rates by another 25 bps on Wednesday, putting the Federal Fund’s target range at 4.50-4.75%. So a 25 bps hike is not surprising and should not move the market at all. What matters to the market is the outlook for interest rates.
Specifically, how many more rate hikes will there be, and how long will rates remain at the restrictive terminal rate? The market appears to be betting that after Wednesday’s rate hike, the Fed will raise rates by 25 bps, which he did only twice (in March), and then begin cutting rates in the second half of 2023.
This means that 1) US inflation (price and wage pressures) will continue to fall towards the Fed’s 2.0% target, and 2) the bet that the US will enter a recession later this year. seems to be based on A desire to start cutting interest rates to support the economy.
But strategists warn the market is underestimating the Fed’s determination to raise interest rates and keep them at restrictive levels longer. By the famous pseudonymous macro-focused Twitter account The Carter And the Goldman Sachs US Financial Conditions Index (FCI) is now at its lowest level since September 2022.
Carter believes that “there will be bloodshed on February 1st” as a result, and Fed Chairman Jerome Powell has “improved financial conditions by dealing forcefully with rate cuts (i.e., betting on rate cuts). It will tighten again… head-on”.
Other strategists agree. “Powell is likely to become more hawkish at the press conference, tightening the financial situation,” Naumann Sheikh, head of finance at crypto asset manager Wave Financial, told Crypto Press. “So we could see a healthy short-term correction in cryptocurrencies and all risk assets,” he added.
Meanwhile, Chris Weston, head of research at Pepperstone, warned that financial conditions have eased enough that Fed Chairman Jerome Powell may want to classify the degree of easing as “unreasonable.” Weston believes this will depress risky assets such as tech stocks and cryptocurrencies.
However, as noted in a recent article, the Bitcoin options market continues to show bias in investor positioning in anticipation of further upside in the short to medium term. Perhaps they are trying to step off their feet.