Recently, Glassnode, a data and research company, published a report showing fluctuations in bitcoin’s yield-to-expense ratio (SOPR) and market value/realized value (MVRV). Glassnode analyst Raphael Schulze-Kraft explains the difference between long-term and short-term holders to analyze the behavior of these types of investors.
Evaluating bitcoin spending behavior
Since bitcoin (BTC) reached an all-time high of $61,782 per unit, market prices have become a bit more unsettled. BTC is currently hovering just above the $55,000 mark, and that’s just before the 12-year anniversary. March 2020, when bitcoin’s market value to realized value (MVRV) ratio fell to 0.88.
Essentially, the VCRM is a calculation where the market value is divided by the daily realized value. This might give someone an idea of what a fair value might be by considering these two elements together.
Coinmetrics researchers show that after the MVRV ratio fell to 0.88 on Black Thursday 2020 (March 12), the MVRV ratio improved a year later. On the 12th. In March 2021, it closed at $57,335, or more than 10 times (1000%), says Nate Maddrey and the Coin Metrics team.
As we approach the 12th. March 2020 Glassnode co-founder and CTO Rafael Schulze-Kraft has published a report titled Sharing Chain Metrics for Short and Long Term Investors. In the report, Schulze-Kraft introduces new variants of the Spent Output Profit Ratio (SOPR) and the MVRV for estimating long-term (LTH) and short-term (STH) holders.
Since the MVRV calculates the split between market value and realized value, the SOPR is an indicator for tracking losses and gains. The SOPR (Spent Output Profit Ratio) indicator acts as a proxy for total market gains and losses, according to a tutorial from Glassnode Academy.
A study published by Schultze-Kraft shows how new variants can rank bitcoin (BTC) by assessing posture behavior.
Total percentage of inactive UTXO. (Glassnode chart).
Glassnode’s research notes that other studies have attempted to estimate holder behavior, such as age groups of issued funds, HODL waves, and bitcoin dormancy rates. According to Schulze-Kraft, the new variants help researchers identify players in the industry.
Our approach is to split the chain activity into the two main industrial players: Short-term holders (STH) and long-term holders (LTH), writes Schulze Kraft. We classify these two types of investors according to the information about the age of the coins.
Technical Manager Glassnode: Class of 2017, Hands of Steel
This data gives researchers statistics on the number of bitcoins that have not been moved since a certain date. The report also states that LTH bitcoins account for a large number of UTXO :
About 37% (~7 million) of existing bitcoin deliveries are unchanged since the last LUP in December 2017. Similarly, more than half of bitcoins in circulation (55%) were no further from the bottom of the market at the end of 2018 than they were a year ago. These figures show that there is a significant number of investors who are committed for long periods of time, i.e. long-term investors (LTH).
Long-Term Holder SOPR (LTH-SOPR). (Glassnode chart).
On the other end of the spectrum, Glassnode points out that the volume of transactions on the chain is 1 million BTC per day. Schulze-Kraft points out that researchers can conclude that these are essentially the same set of coins that continue to circulate on the network.
MVRV (blue) and LTH-MVRV (orange). (Glassnode chart).
Moreover, by observing the historical movements of UTXO, Glassnode can calculate the probability that UTXO will be depleted by its age/lifetime.
Therefore, our hypothesis is that if UTXO exceed a certain life threshold of 100 to 200 days, then these coins are held by market participants who are less inclined to speculate and trade based on short-term timeframes – long-term holders, notes the study.
And vice versa, the study adds. The UTXOs issued earlier belong to holders of short-term contracts. In determining the LTH and STH data by age, Schulze-Kraft writes that a minimum of 155 days is considered a long-term holder (LTH). Meanwhile, short-term holders (STH) are defined as all UTXO with a shelf life of less than 155 days, according to Glassnode’s Breaking Chain Metrics study.
Class of 2017, hands of steel. #Bitcoin https://t.co/eD8u5AL90E
– Rafael Schulze-Kraft (@n3ocortex) 15. March 2021
Glassnode’s research highlights the importance of bitcoin spending behavior and explains how certain market players will react to a greater or lesser degree. As bitcoin’s price performance continues to impress, it becomes increasingly important to assess how different market participants are reacting to the rising price, Glassnode explains.
Conversely, a coin that has exceeded the 155-day threshold to become an LTH holding coin is unlikely to be issued on a statistical basis. It often only comes back to life in times of volatility and at higher prices in bull markets, notes Glassnode analyst Schulze-Kraft in a report.
What do you think of Glassnode’s report on long and short term owners? Let us know what you think in the comments below.
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