22 Mar 2021

Are we getting close to the top of this bull run? - On-chain indicator suggests we’re nearing the climax of the current bull run

Are we nearing the top of this rally? One cyclical indicator indicates that there is further room to grow, but we’re getting closer to a top.
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Source: Glassnode, Bitstamp
Glassnode’s Reserve Risk indicator tracks the conviction of hodlers through cycles. The metric is based on coin-days (coin-days accumulates each day a coin is not spent) in relation to the current bitcoin price. The general idea behind the metric is that not selling during bull runs carries an opportunity cost. At some threshold, the opportunity cost will tempt more long-term hodlers to sell. A rising reserve risk thus identifies selling from long-term hodlers and represent a wealth transfer to new buyers. Historically, the market has tended to top as the reserve risk climbs above 0.02. The current reserve risk ratio sits at 0.008, still far below the peak zone of the previous bull runs, but also substantially higher than the reserve risk ratio we usually see in bitcoin. The reserve risk has only been higher than the current level on three occasions since 2012, during the rapid climaxes of the bull runs of 2013 and 2017. This could indicate that we’re nearing the final climax of this bull run, and the chart will be something to follow onwards.
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