By Peter Bergman (MoneyAmped.com)
With a proven track record, an obscure yet dependable indicator of bitcoin’s price has recently turned optimistic, indicating the emergence of a significant bullish market trend.
According to Glassnode, a blockchain analytics firm, the Reserve Risk indicates that Bitcoin (BTC) has surpassed zero, indicating a positive trend for the first time since October 2021.
Prior crossovers above the zero line have facilitated exponential asset value increases. On Monday, Ali Martinez, an on-chain analyst, tweeted that the gains in 2012, 2013, 2015, 2019, and 2020 were 2,830%, 566%, 6,400%, 99%, and 487%, respectively.
As defined by Glassnode, reserve risk is a cyclical indicator with a long-term perspective. It involves comparing the incentive to sell at the current market price and the ability of long-term holders to resist the urge to liquidate their assets. A decreased reading indicates a high level of conviction among “HODLers,” (a colloquial term used to refer to long-term cryptocurrency investors), while an increased reading suggests the opposite.
The computation of the reserve-risk multiple involves the division of the value of the indicator daily by its 365-day moving average.
The historical instances of the reserve-risk multiple crossing over the zero thresholds have demonstrated a reliable ability to forecast significant upward and downward market movements.
Drawing from historic trends, the recent occurrence of a positive crossover suggests that the cryptocurrency’s notable 80% year-to-date surge to 10-month highs exceeding $30,000 could signify the initial stage of its upward trajectory.
The bullish implication aligns with the historical pattern of Bitcoin exhibiting significant surges in value during the months preceding the mining reward halving. The code above is designed to decrease the rate of expansion of the cryptocurrency’s supply by 50% after every four years. The upcoming fourth reward halving of Bitcoin will occur in April of the following year.
