Cryptocurrency analytics firm Alphractal has released its latest market assessment, focusing on Bitcoin’s Reserve Risk indicators, which are showing critical signals that could shape the market’s direction.
While indicators point to potential overbought conditions, there may still be room for optimism.
The report highlights a sharp increase in Moving Value of Coin Days Destroyed (MVOCDD), reflecting increased activity among long-term Bitcoin holders. This increase is indicative of intense market movement, which is usually associated with higher volatility and risk of price corrections.
In addition, Reserve Risk, a key metric that assesses the balance between long-term Bitcoin holder confidence and the BTC price, has reached a historic resistance level. In previous market cycles, similar levels have coincided with periods of significant price pullbacks, according to the analytics firm.
Despite these warning signals, Alphractal notes that the market has yet to reach the overheating levels seen in past Bitcoin peaks.
The analysis explores the importance of Reserve Risk as a tool for understanding market conditions. When Reserve Risk is low, it reflects strong confidence among long-term holders and favorable price levels for accumulation. Conversely, high Reserve Risk generally indicates a greater likelihood of a correction. Supporting this is the behavior of metrics such as VOCDD and MVOCDD, which track the movement of old Bitcoin and provide insight into market volatility and potential tops.
Looking forward, Alphractal suggests that if Reserve Risk breaks out of the “green quadrant” in the coming months, Bitcoin could enter a parabolic rally similar to patterns observed in previous bull markets.
*This is not investment advice.