In the past few years it has been difficult to gauge the behavior of buyers and sellers in the cryptocurrency market, but it is now difficult to gauge the position of bitcoin holders and the cost base over time. In this article I am going to provide you with some basic guidelines for performing reviews of the “Buyer and seller behavior“At the expert level at the lowest cost.

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It is difficult to evaluate the Bitcoin network using any particular formula or method, but over the years the determination of the value of a Bitcoin can be calculated based on a function of demand and supply. . The supply of Bitcoin is measured mathematically and written in immutable and open source code accessible to everyone, due to this demand it can be defined with a number of additional properties currency that enables Bitcoin to function as a global digital currency.

And since its inception more than 12 years ago, the demand for Bitcoin has tended to increase year on year, but in short periods of time its volatility is higher than that of many other asset classes. Based on on-chain data, investors can estimate changes in demand and the likely impact on price by analyzing the behavior of Bitcoin buyers and sellers at any point in the cycle (present or past).

This is “Fundamental analysis”On-chain by looking at the internal economics within the Bitcoin network.

By leveraging Bitcoin’s blockchain data, investors can measure the economic behavior – including inflows, outflows, holding loops, and cost base – of everyone involved in the market. We track every participant in the chain using simple address-based heuristics through algorithms that have been optimized by leading data engineers on Glassnode.

Identify participants and evaluate their role in the Bitcoin “economy” through intuitive graphics that will help you make more accurate decisions and be less affected by the short-term fluctuations that are common in the cryptocurrency market.

We should first understand some of the key components that make up these indicators:

1. Miners and mining pools: Mining companies are responsible for securing the network as well as releasing new bitcoins. Their business is also financed with mined bitcoins, they are the only natural sellers participating in the network. The selling pressure associated with miners is proportional to the rate at which new bitcoins are released.

2. Exchanges: Exchange responsible for determining the price movement of Bitcoin. Cross-exchanges are online streams from market participants, including miners, OTC traders, custodian banks and owners or investors.

3. Owners, investors and users:: Owners, investors and users are balancing the Bitcoin economy. On-chain data measures the acceptance rate by financial institutions, wealthy investors or small private investors over the period of time in which they hold Bitcoins.

Source: ARK Investment Management LLC, 2020

Bitcoin’s on-chain data describes the behavior of participants using a simple and transparent accounting system called “unused transaction output” or UTXO for short.

UTXO records the number of bitcoins in each address at the time of each transaction. Most importantly, UTXO allows investors to keep track of two data points in each address in the bitcoin ledger:

1. Number of coins in each address (volume) and

2. The time the coin was in each of these addresses (time).

Tracking the behavior of buyers and sellers in the chain can help investors spot inefficiencies in Bitcoin’s price movement, from which we can derive relative valuation metrics to identify the short to medium term price underperformance of Bitcoin in your trading or investment strategy.

Cointime Destroyed was widely featured on the Bitcointalk.org forum under the pseudonym in 2011 ByteCoin, it measures the turnover of Bitcoin over time based on the number of Bitcoins that are in a certain period of time (volume) and the holding time before this transaction takes place (holding period).

For example, if 2 Bitcoins do not move for 7 days, but then a transaction is received, 14 Coindays will be destroyed.

The increase in Cointime Destroyed means that Owners draw money from long-term storage and benefit. With over $ 5 billion today, we can safely assume this is a healthy bull market, as the following graph shows: Bitcoin price has more than tripled its previous all-time high, but Coinyears Destroyed is still below the all-time high compared to early 2018.

Source: ARK Investment Management LLC, 2020

2. On-chain gains and losses

OK Glass knot Brainstorm in 2019.

Recognized Profits / losses (which are two different visual indicators) that measure the total USD value of bitcoins trading for profit or loss. If Bitcoin is trading at a price higher or lower than the price it last moved, its next move will generate a profit or a loss. Periods of high volatility maximize gains and losses on market highs and lows, as shown below.

Source: ARK Investment Management LLC, 2020

Offer support for benefit / loss (These are 2 similar metrics but describe a different perspective) that measure how much bitcoins are left in profit or loss compared to their last trade. Today, the supply of profitable bitcoins is close to an all-time high, and the supply at a loss is the lowest it has been since late 2017. Even if the number of bitcoin losses due to profitable bitcoins is equal to or higher, the data shows that the price is already bottoming out as shown below.

Source: ARK Investment Management LLC, 2020

OK Nic Carter and Antoine Le Calvez Ideas in 2018.

• Bitcoin market capitalization is the Bitcoin market capitalization at current prices.

• Bitcoin realized capitalization is the capitalization of the sum of all bitcoins at the last movement price.

Whenever the market capitalization falls below the actual limit, the overall condition of the Bitcoin market is oversold or indicates over-speculation (which suggests this is a good time) to buy Bitcoin.

Source: ARK Investment Management LLC, 2020

OK Nic Carter Ideas in 2018.

Thermo Capitalization is the total USD value of coins paid to miners to validate transactions and secure the Bitcoin network. Like Bitcoin’s market cap over the past 12 years, thermal capitalization has increased, albeit at a slower rate, mainly due to a deflationary surge in Bitcoin supply. By April, thermal capitalization was around $ 23 billion, nearly 98% below Bitcoin’s market cap and 93.5% below its actual limit, suggesting that miners are not dominating as natural sellers.

Although thermal capitalization does not provide clear signals about the buying and selling behavior of Bitcoin holders, it does It is an important metric for evaluation.

Source: ARK Investment Management LLC, 2020

Designed by Dhruv Bansal in 2018.

“HODL” waves that split the entire circulating supply of the Bitcoin network into bands of hold cycles.

For example, a 1 week HODL wave measures the percentage of bitcoins traded in the last week, a 1 to 2 year HODL wave measures the percentage of bitcoins traded during the previous one to two year period, and so on.

Usually, usually, normal “HODL waves” There are 12 waves (you should follow my link above) but the simple chart below from ARK Investment shows that the short term holding bands rise significantly during bull market periods and the long term bands rise during large market downturns. Currently, about 55% of Bitcoin supply hasn’t changed in over a year, which further defines investors’ belief in long-term focus.

Source: ARK Investment Management LLC, 2020

Summary

Through the above data sources, you can also see the signals that partially determine the buying and selling behavior of Bitcoin holders, right?

Years ago it was almost impossible to be exposed to such data, and now you can use data visualized on a chart like the one above. I hope the information in this article will help you make investment decisions.

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Compilation and processing – Crap by Synthetic team