Reserve Risk, also known as "Reserve Risk", is an indicator model that combines market prices with on-chain HODL (holding) or liquidation levels. It constructs a reflexive oscillator that shows long-term accumulation periods followed by feverish peaks at market tops.
Simply put, it is used to measure risk and sentiment swings in the cryptocurrency market.
Mainly targeting two main factors: market price and on-chain holding or liquidation behavior.
If market prices remain relatively stable or slowly increase for an extended period of time, and on-chain holders are in no rush to sell or liquidate their crypto assets, indicators will point to a prolonged period of accumulation.
This means that market participants are more inclined to hold currencies, showing relatively stable sentiments.
Reserve risk indicators show sharp spikes when market prices rise rapidly and there is a frenzy.
This suggests that participants are more inclined to sell or liquidate their crypto assets, possibly because they believe the market is overheated and risky.
The formula of reserve risk indicator (Reserve Risk) is as follows:
Reserve Risk = HODL Volatility / HV (Holder Volatility)
HODL volatility represents the fluctuation of holdings of on-chain holders, and HV (holder volatility) represents the volatility of on-chain holders.
This is also an indicator calculated for a specific time period. The holding data of on-chain holders during a period of time is used to calculate its fluctuation range and divide it by the volatility of the holder to obtain the reserve risk indicator.
From the perspective of indicator attributes, it is more suitable for evaluating whether it is a peak, and it is also a supporting indicator and cannot be used as the main reference.
The so-called supporting type, explained by Reserve Risk, means that when the market trend has undergone a sufficient upward cycle, then we will evaluate whether there are enough supporting indicators to prove the peak position. To put it simply, we will not keep an eye on it all the time. The indicator is used only after speculation has been generated.
In my system, the corroborating indicators correspond to the signal indicators, which I will explain later.