Bitcoin Realized HODL Ratio is one of the metrics to identify the behaviour of Bitcoin investors, helping to understand market cycles & potential turning points for Bitcoin’s trade price.
The Realized HODL Ratio metric compares how newer, less committed Bitcoin investors, or say short-term holders, act compared to more committed, experienced investors, or say, long-term holders.
Realized Cap is the total value of all bitcoins based on the price at which they were last moved, rather than the current market price. This can offer a more accurate idea of how much the entire market values their bitcoins.
This ratio divides the realized cap of recently moved bitcoins (short-term holders) by the realized cap of bitcoins that haven’t been moved for a long time (long-term holders).
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High values of the ratio may indicate that new or short-term investors are dominating the Bitcoin market, which might happen near market peaks where there’s more speculative trading.
Low values of the ratio might suggest that long-term holders are dominating the market, which usually happens near market bottoms. It indicates a strong group of investors who are not selling even if prices drop.
Let’s Imagine that Bitcoin’s trade price is surging fast & in that situation a lot of new investors are buying Bitcoin, hoping to make quick money. These types of investors might sell their Bitcoin holdings soon if they see small % profits or if the market goes down.
In this situation, we will say that the Realized HODL Ratio is high, showing that a big part of the Bitcoin market value is held by short-term investors.
Now consider another situation where a major Bitcoin trade price drop occurred. In that situation many speculative investors have sold their Bitcoin, leaving mostly those who plan to hold it for a long time, believing in Bitcoin’s future rise. These holders haven’t moved their Bitcoin for a long time.
In this scenario, we will say that the Realized HODL Ratio is low and this situation will indicate long-term holders dominating the Bitcoin market value.
Read also: Bitcoin “Coin Days Destroyed” metric explained!
What is the Bitcoin Realized HODL Ratio?
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Benson Toti
Benson Toti
Benson Toti