Letter no.20
Date: 9.3.2022 BTC Price: 42.2k
Hey subscribers,
In my last letter, I’ve analyzed the market through the lens of exchanges, what do they tell us about the direction of the market. I closed the letter with a bit bearish and outlined that more downtrend is still on the table.
In this letter, I’m going to focus on coins’ lifespan, and what it tells us about the market.
Since the last letter, Bitcoin has managed to reach a high of 45k per coin from there crashed back to the 37k area and at the time of writing is trending back up to the 42k area. Simply, consolidating between the low 30k to the mid 40k.
Analysis Breakdown
I’ll start off with Spent Volume Age Bands, which separates the on-chain transfer volume based on the coin’s age. This way we’ll be able to access which market participants are the major contributors to the volume.
Looking at the long-term holders’ age cohorts, we can see clearly that they’re taking a small part of the volume, therefore, spending very minimally. With exception of 28 of Feb when they were taking around 15% of the volume, coins with a lifespan of 6m-12m have been the main contributors. These in my opinion might be hodlers exiting at breakeven / small loss.
But overall the volume from LTH is relatively low. Therefore it is mainly indicative of a hodling behavior; the unwillingness of LTH to sell coins in a belief of higher prices.
Continuing with ASOL, which is the average age of coins transacted on-chain.
We can see that it is relatively low, currently, the average age of coins is 30 days.
Coins with this lifespan are held by STH, new market participants/traders/speculators. They can be considered as weak hands, whether because of a lack of knowledge in the market or because of their strategy (traders).
It is healthy to see younger coins being spent at times of long downtrend and consolidation. On the other hand, old coins, held by LTH are not being spent and it strengthens the idea that they’re expecting higher prices.
I’ll close off with Realized Cap HODL Waves.
We can see that the young coins cohorts ( 1d-3m) have been mainly decreasing in the last months. This means that they’re maturing into older age cohorts, this is typical to HODLing times that are setting the ground for a macro uptrend, where old coins are being spent and turning to young coins which are then taking the larger size of the overall active supply.
Once these cohorts are starting to increase we can know that LTH are spending their old coins and that a macro uptrend is ahead.
So far, I look at this as a neutral indication, because we still cannot know for how long the young cohorts will decrease/consolidate. It’s a metric to keep an eye on.
Conclusions
So, looking at the lifespan of coins spent I can tell that we’re in a hodling era that comes along with downtrend/consolidation, this may indicate a longer consolidation or more downtrend. The positive thing is that the experienced market participants (LTH) are not leaving the market, probably having the experience, knowledge, and belief that higher prices are ahead, therefore they’re HODLing.
As for now, I’d stay neutral and be cautious.
Links and References
Newsletter Archives: Dor’s On-chain Newsletter
Data Sources: Glassnode (T3 paid subscription)
Disclaimer
Nothing written in this newsletter is to be considered as investment / trading advice, do your own research.
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