Even as the market wakes up to a bearish drop, the outcome of a week that saw significant sideways movement, all is not lost. Bitcoin’s ‘hodling‘ ambitions still remain intact, even after the price drop below the elusive $9,000 mark.
According to the latest report by Arcane Research the price level of Bitcoin still presents an “attractive risk/reward ratio for investors.” Citing data from Glasssnode, specifically looking at the Reserve Risk metric, the report posits the confidence of long-term Bitcoin holders relative to the current price of Bitcoin.
It should be noted that while the report does not take into consideration the March 7 drop, the Reserve Risk metric assessment of sentiment holds true, both in the spot and the futures market.
The Reserve Risk metric is measured as the price of Bitcoin by the “HODL Bank” i.e. the total amount [in USD] over time measured as the opportunity cost of the decision to hold rather than sell over Bitcoin’s lifetime, as Ikigai, crypto-focused asset management fund.
Arcane’s report stated that the Reserve Risk is at “low levels,” which is indicative of an “Attractive risk/reward ratio,” to make a Bitcoin investment. Based on the chart above, the green zone is akin to a high-confidence sentiment in the market as the returns from hodling, at the time, is more than selling. Conversely, the red zone, indicates high Reserve risk, as the hodling confidence among investors is low.
Back on February 18 when Bitcoin saw a massive 5.77 daily price gain, the Reserve Risk was consolidating in the green zone. Since the final quarter of 2019, and for the entirety of 2020, the Reserve Risk has been trading in the green zone indicating rising hodlers’ confidence in the price of Bitcoin.
On the contractual side of the market, similar trends are seen. The regulated Futures exchange, the Chicago Mercantile Exchange [CME] has seen a major jump in the premium on contracts expiring in March 2020 and June 2020. The aforementioned Arcane report posits it at 1.25 percent and 4.4 percent respectively suggesting a bullish short-term and long-term sentiment for Futures’ investors.
According to data from skew markets, the Bitcoin call options contracts traded on Deribit and OKEx are trading with a strike price as high as $28,000 for contracts expiring on 24 April 2020. Short-term contracts i.e. with an expiration date of March are less optimistic with strike prices of $8,500, $9,750, and $10,000, respectively.