Bitcoin Continues to Offer an Attractive Risk-Reward Ratio

Leading cryptocurrency bitcoin (BTC) continues to offer an attractive risk-reward ratio for those looking to invest, according to an on-chain indicator that successfully predicted a bull run in early 2023.

The “reserve risk” indicator, which measures how long-term holders of bitcoin are willing to hold on to their cryptocurrencies, remains in the green zone below 0.002, according to data tracked by CryptoQuant. The metric ranges between 0 and 1.

Lower readings are a sign that long-term holders are motivated to hold their bitcoin at current market rates rather than sell, suggesting favorable demand-supply dynamics and an attractive risk-reward ratio for those looking to make additional or new investments.

MintingM, an India-based crypto research firm, said: “Reserve risk remains in the green zone, meaning that buying BTC at current levels offers exceptional reward despite the risk. It is important to invest in bitcoin when reserve risk in the green zone has yielded outsized returns over time.”

Reserve risk tends to oscillate in sync with bullish and bearish trends. Historically, the green zone below 0.0027 has signaled a slow transition from the late bear market to the bull market, while readings above 0.02 have signaled bullish market peaks.

Other indicators that measure the percentage of inactive supply over a period also show a return to a holding strategy after making some profits at record levels earlier this year.

Consistent bullish messages from on-chain indicators support the idea that impending interest rate cuts by the U.S. Federal Reserve will contribute to bitcoin’s rally from its prolonged range between $60,000 and $70,000.

Bitcoin is trading at $64,420, up 0.3 percent in the last 24 hours, according to CoinDesk data.