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Technical Analysis

Reserve Risk Has Been Oversold For Five Months: BTC On-Chain Analysis

2 mins
Updated by Andrew Rossow

In Brief

  • Reserve risk crossed into oversold territory on January 2022.
  • BTC bottoms have historically been reached 1-4 months after such crosses.
  • Find out what happens if a bottom has not yet been reached.
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Be[In]Crypto takes a look at the reserve risk on-chain indicator and its components. These indicators help determine if Bitcoin (BTC) has reached a bottom.

What is BTC reserve risk?

The Reserve Risk is a cyclical BTC on-chain indicator that measures the confidence of long-term holders relative to the current asset price. When confidence is high but the price is low, reserve risk gives low values. These times have historically offered the best risk to reward ratios.

Specifically, values below 0.002 (green) are considered to provide favorable risk to reward ratios. Conversely, those above 0.02 (red) are considered to provide disadvantageous risk to reward ratios.

Throughout the price history of BTC, every single market cycle top has been reached while reserve risk provided a reading above 0.02. Conversely, every single bottom has been reached below 0.002. 

Current reading

An interesting observation comes when analyzing the time it takes for a bottom to be reached after reserve risk crosses below 0.002 for the first time.  

  • 2011: the bottom was reached one month after reserve risk first crossed below 0.002. 
  • 2014: the bottom was reached four months after reserve risk first crossed below 0.002
  • 2019:  the bottom was reached one month after reserve risk first crossed below 0.002. 

In 2022, reserve risk decreased below 0.002 for the first time in the beginning of January. The current bottom of $35,036 was reached later that month.

If a bottom has not yet been reached, it would mean that five months have passed since reserve risk first decreased below 0.002. As a result, it would be the longest time it took for BTC to reach a bottom after such a cross occurred.

Additionally, it is worth mentioning that reserve risk has not crossed above 0.2 since December 2017.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

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In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions.