THE Bitcoin the sell-side risk ratio is calculated by dividing the sum of all realized on-chain profits and losses by the realized capitalization, providing a comparative view of daily investor activity against the total market capitalization adjusted for inflows and outflows in real time.
An increase in this indicator indicates a higher likelihood of selling pressure, potentially leading to increased market volatility.
Between February 8 and March 13, Bitcoin's sell-side risk ratio saw a significant increase, from 0.12% to 0.777%. This increase follows a significant rise in the price of Bitcoin, from $45,330 to $73,104. This period marked the highest sell-side risk ratio and the first instance where the ratio exceeded the 0.75% threshold since March 9, 2021.
After this peak, BTC fell to $61,860 on March 19 before to recover to $70,000 on March 26. The sell-side risk ratio adjusted to 0.556%.
The increase in the sell-side risk ratio above its upper limit shows a period of high value achievement among investors, often seen during the latter stages of bull markets or bear market capitulation events. However, such spikes can also occur at the start of bull cycles, especially when the market undergoes initial corrections.
The subsequent correction in Bitcoin price and sell-side risk ratio indicates volatility. However, this volatility is not unprecedented. Since 2011, the trend has been for yields to fall with each market cycle, leading to a decline in the sell-side risk ratio. This is consistent with the observed trend that with each cycle investors make fewer profits, suggesting a maturing market.
The continued maintenance of the ratio above the 0.1% mark since November 29, 2023 further underlines a shift in the very low value realization observed on September 18, 2023, at 0.039%. This transition suggests a move away from market bottoms and accumulation phases towards more active and possibly speculative trading phases.
Crossing the upper limit signals an important turning point, likely driven by investor optimism and profit-taking. However, the historical trend toward lower highs in this ratio may indicate a gradual stabilization of the market, with less pronounced peaks of value realization as the market matures.
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