Cryptocurrency Q&A
How is bitcoin reserve risk calculated?
How is bitcoin reserve risk calculated?
Eleonora
Sun Jul 07 2024
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7 answers
2046
Could you elaborate on the methodology used to calculate the reserve risk associated with Bitcoin? I understand that it's crucial for investors to gauge the level of risk associated with the cryptocurrency's reserves, but I'm not entirely clear on the specific metrics and formulas involved. Would you mind walking me through the process step by step? From what I've gathered, it involves analyzing the distribution of Bitcoin holdings, liquidity levels, and potentially other factors. Could you expand on these points and explain how they contribute to determining the overall reserve risk?
7 answers
Leonardo
Tue Jul 09 2024
It is calculated by dividing the current price of bitcoin by the "HODL Bank," a term coined by Glassnode to represent the total supply of bitcoins that have not been moved in a specific timeframe.
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EchoSeeker
Tue Jul 09 2024
By dividing the current bitcoin price by the size of the HODL Bank, reserve risk provides a quantitative measure of the potential downside risk associated with holding bitcoin.
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Claudio
Tue Jul 09 2024
This metric essentially measures the opportunity cost of holding bitcoin, as each day a coin is held, the owner foregoes the opportunity to exchange it for its current cash value.
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Martina
Tue Jul 09 2024
The HODL Bank is determined by analyzing the blockchain data to identify bitcoins that have remained dormant for extended periods.
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CryptoConqueror
Tue Jul 09 2024
These coins are considered to be held by long-term investors or "HODLers," who prioritize holding onto their bitcoins rather than selling them.
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