Bitcoin (BTC) on-chain: market indicators point to bottom signals

Be[In]Crypto has taken a look at Bitcoin’s on-chain indicators, focusing this week on reserve risk, breakeven price as well as cumulative value of days destroyed (CVDD) Cumulative days of value destroyed).

Bitcoin Reserve Risk Indicator

Reserve risk is a cyclical on-chain indicator of BTC that measures long-term holder confidence in the current price of the asset.

When confidence is high but price is low, reserve risk shows low values. In Bitcoin’s history, these periods have presented the best risk/reward ratios.

On July 6, the reserve risk indicator fell to a new all-time low of 0.00099. This is the very first time that this indicator has fallen below 0.001. It is therefore possible that a bottom has been reached.

In the past, Bitcoin’s bottom was confirmed when the indicator broke above its descending trendline (in black). For this break to fail, the reserve risk indicator must exceed 0.002.

The CVDD indicator

The cumulative value of days destroyed (CVDD), or Cumulative days of value destroyed, corresponds to the ratio between the cumulative value in USD of the days of coins destroyed and the age of the market (in days). In the past, this indicator has been an accurate index of absolute market lows, especially during the bottoms of 2015, 2019 and 2020 (black circle).

Interestingly, BTC price never dipped below CVDD, instead bouncing back before reaching it.

The line sits at around $15,000, which is barely lower than the current bottom of $18,700 (red circle).

Bitcoin’s balanced price

The balanced price Balanced price) is the difference between the realized price and the BTC transfer price. The transfer price is the cumulative sum of days of destroyed USD coins, adjusted by circulating supply and total time since Bitcoin’s inception.

Historically, the bottom was reached when the price fell slightly below the indicator, before regaining it (black circle).

During the current decline, BTC reached its equilibrium price on June 18 and then rebounded.

As with the CVDD indicator, this indicator suggests that either a bottom has been reached or that one should expect a final drop before the bottom.

Balanced Price Chart – Glassnode


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