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This indicator uses a ratio of Realized Value HODL Waves.
In summary, Realized Value HODL waves are different age bands of UTXO’s (coins) weighted by the Realized Value of coins within each band.
The Realized Value is the price of UTXO’s (coins) when they were last moved from one wallet to another.
RHODL Ratio looks at the ratio between RHODL band of 1 week versus the RHODL band of 1-2yrs.
It also calibrates for increased hodl’ing over time and for lost coins by multiplying the ratio by the age of the market in number of days.
When the 1 week value is significantly higher than the 1-2yr it is a signal that the market is becoming overheated.
The indicator is able to identify with great accuracy the price high of each of Bitcoin’s previous macro cycles.
It identifies the market top to within a few days accuracy.
RHODL ratio entering into the red band signals that the market is approaching the top of its cycle. This has historically been a good time for investors to take profits in each cycle.
Unlike other on-chain indicators, RHODL ratio does not give a false signal of a cycle high in April 2013. This gives it a unique advantage over other on-chain indicators.
RHODL Ratio is useful for predicting Bitcoin price at the extremes of market conditions. It is able to forecast where Bitcoin price may need to pull back when the RHODL Ratio line enters the upper red band, and also when $BTC price may rally after spending time in the lower green band. It does this on high time frames so has historically identified the major highs of Bitcoin prices throughout Bitcoins’ existence.
The original article that goes into more details of RHODL Ratio can be found here: Realized HODL Ratio Article, December 2020.
The RHODL Ratio indicator has since gone on to inspire other onchain tools such as ARK Invests Short-to-Long-Term-Realized-Value Ratio, which was first released 12 months after RHODL Ratio in their paper On-Chain Data A Framework to Evaluate Bitcoin, published in Dec 2021. ARK Invest's SLRV uses the original RHODL Ratio method of comparing Realised HODL time periods but uses 1-day / 6month-1yr as its ratio. The Ark Invest article can be viewed in the white papers section of their website.
This adaptation of NVT Signal adds standard deviation bands to identify when Bitcoin is overbought or oversold.
Any information on this site is not to be considered as financial advice. Please review the Disclaimer section for more information.