Top 5 Watershed Moments In BTC On-Chain Analysis’ History. Is Your Favorite In?
17 Février 2022 - 02:49PM
NEWSBTC
These five moments shaped Bitcoin On-Chain analysis. Down below
you’ll find a basic 101 article that reviews the basic concepts of
the trade. If you have any problem with the list, David Puell is to
blame. He’s a full-time on-chain analyst and the creator of MVRV
and Puell Multiple. He didn’t include the metrics he created on the
list, which says a lot. Related Reading | Lessons From Reason’s
“The Fake Environmentalist Attack on Bitcoin” Mini-Doc In the
following article, there’s also something for on-chain analysis
experts. A side game called: Did your favorite moment make
it? 1. ByteCoin invents cointime destroyed in 2011, the very
first on-chain metric ever, still used today, and first metric to
detect holding behavior in any financial asset. — David Puell
(@kenoshaking) February 17, 2022 Anyway, let’s get into it.
On-Chain Analysis Moment #1- ByteCoin Invents Coin Days Destroyed
(CDD) AKA Coin Time Destroyed Invented In 2011, according to Puell
CDD is “the very first on-chain metric ever, still used today, and
first metric to detect holding behavior in any financial asset.”
How does the metric detect holders, though? According to Glassnode
Academy, “Coin Days Destroyed is a measure of economic activity
which gives more weight to coins which haven’t been spent for a
long time.” So, the first eureka moment was to get the coin’s age
into the equation. That way, the all-important holders entered into
the equation. Glassnode again: “It is considered an important
alternative to looking at total transaction volumes, which may not
accurately represent economic activity if value was not stored for
a meaningful time. Conversely, coins held in cold storage as a long
term store of value are considered economically important when they
are spent as it signals a notable change in long-term holder
behaviour.” BTC price chart on Bitbay | Source: BTC/USD on
TradingView.com 2. Moment #2 – Willy Woo and Chris Burniske Invent
NVT Ratio This one emerged in 2017, and, according to Puell,
it’s “where on-chain begins its Golden Age and became clearly an
ecosystem of specialists”. It’s also “the first application of
traditional economic/financial concepts to Bitcoin (network P/E
ratio, inverse velocity)”. But, what’s the NVT Ratio specifically?
Glassnode Academy responds: “Network Value to Transactions (NVT)
Ratio describes the relationship between market cap and transfer
volume. Per Willy Woo, its creator, NVT can be considered analogous
to the PE (price to earnings) Ratio used in equity markets.”
Another way to look at it is, “NVT is that it is the inverse of
monetary velocity, comparing two of Bitcoin’s primary value
propositions”. Those are store of value Vs. settlement/payments
network. 1. ByteCoin invents cointime destroyed in 2011, the very
first on-chain metric ever, still used today, and first metric to
detect holding behavior in any financial asset. — David Puell
(@kenoshaking) February 17, 2022 On-Chain Analysis Moment #3 – Nic
Carter And Antoine Le Calvez Invent Realized Capitalization Created
In 2018, Puell thinks Realized Capitalization is “ the single most
important and robust metric in the field, and first verifiable
discovery of the cost basis of any asset”. But, what is it exactly?
According to Glassnode Academy, Realized Capitalization also makes
on-chain analysis look into the age of the coins. “Realized
capitalization (realized cap) is a variation of market
capitalization that values each UTXO based on the price when it was
last moved, as opposed to its current value. As such, it represents
the realized value of all the coins in the network, as opposed to
their market value.” Ok, “realized cap reduces the impact of lost
and long dormant coins, and weights coins according to their actual
presence in the economy of a given chain”. How does it do it,
though? Glassnode again: “When a coin that was last moved at
significantly cheaper prices is spent, it will re-value the coins
to the current price, and thus increase realized cap by a
corresponding amount. Similarly, if a coin is spent at a price
lower than when it was last moved, it will re-value to a cheaper
price and have a corresponding decrease on realized cap.” Moment #4
– Dhruv Bansal Invents HODL Waves Created in 2018, HODL Waves
is the “last major primer in on-chain analysis, first metric to
segregate supply into different conceptual frameworks”. According
to Purell, it’s also the “most comprehensive economic time analysis
on Bitcoin to date”. Surprising no one, HODL Waves also looks at
the age of the coins. According to Glassnode Academy: “HODL Waves
provide a macro view of the age of coins as a proportion of total
coin supply. This provides a gauge on the balance between short
term and long term holdings. It can also indicate where changes in
this age distribution occur as the thickness of HODL wave bands
change in response to dormant coins maturing, or when old coins are
spent, resetting their age into the youngest category.” 5. @ErgoBTC
releases the forensics of PlusToken in 2019, the grey swan that
defined the market structure of Bitcoin for that year and first
relevant nation-state attack on the asset. — David Puell
(@kenoshaking) February 17, 2022 On-Chain Analysis Moment #5 – Ergo
Releases The Forensics Of PlusToken This famous case happened in
2019. According to Purell, it’s “the grey swan that defined the
market structure of Bitcoin for that year and first relevant
nation-state attack on the asset. For a primer on the situation, we
had to consult Crypto Briefing, who spoke to: “Ergo, the lead
researcher of the report, told Crypto Briefing in an email that the
most striking feature of this scam was its size. “Billion-dollar
scams are very rare,” they said. “We did not expect the previously
reported 200K BTC volumes to be accurate, but they were.” Related
Reading | Bitcoin On-Chain Demands Suggests That The Market Has
Reached Its Bottom The Ergo team also explained why the laundry of
the funds didn’t work that well. It was because they practiced
“self-shuffling.” What’s that, you ask? Crypto Briefing
again: “It refers to the “repeated UTXO splitting and merging
in hundreds of transactions,” according to the report. This method
was both easy to track and the most common way in which PlusToken
funds were handled.” This case wouldn’t be complete with a big
institution’s involvement. This time, the suspect is Huobi: “Huobi
played a major role in off-loading these funds too, with nearly
250,000 addresses associated with the PlusToken funds. These
addresses were reduced to two clusters which were identified
following the incompetent privacy standards.” Of course, those are
just suppositions. When it comes to the giant Huobi, nothing’s been
proven. Feature Image by analogicus on Pixabay | Charts by
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