Just recently, the onchain data and research company Glassnode published a report that presented variations in the ratio of Output Profit Output (SOPR) and Market Value to Realized Value (MVRV) of Bitcoin. Glassnode analyst Rafael Schultze-Kraft explains the difference between long-term and short-term owners to analyze the behavior of these types of investors.
Evaluation of Bitcoin spending behavior
Since Bitcoin (BTC) hit an all-time high of $ 61,782 per unit, market prices have been a little more turbulent. Currently, BTC is hovering just above the $ 55,000 value and it happened terribly just before the anniversary of March 12, 2020 when the market value to realized value ratio (MVRV) of Bitcoin fell to 0.88.
Basically, an MVRV is a calculation in which the market value is divided by the realized value every day. It can give someone a sense of what the “fair value” might be when you look at the two together.
Coinmetrics researchers show that the MVRV improved a year later after the MVRV rate dropped to 0.88 on Black Thursday 2020 (March 12th). “It closed at $ 57,335 on March 12, 2021, which is over 10x (1,000%) profit,” explains Nate Maddrey and the team at Coin Metrics.
Ahead of the one-year anniversary on March 12, 2020, Glassnode Co-Founder and CTO, Rafael Schultze-Kraft, released a report titled “Resolving Onchain Metrics for Short- and Long-Term Investors”. In the report, Schultze-Kraft introduces new variations of the Spent Output Profit Ratio (SOPR) and the MVRV ratio to evaluate long term holders (LTH) and short term holders (STH).
Since MVRV calculates the gap between market value and realized value, SOPR is an indicator for monitoring losses and gains. “The SOPR indicator (Spent Output Profit Ratio) serves as a proxy for the entire market profit and loss,” says a study guide published by the Glassnode Academy.
The study published by Schultze-Kraft shows how the new variants can categorize Bitcoin (BTC) by evaluating the holding behavior.
The cumulative amount of dormant UTXOs in percent. (Glassnode diagram).
Glassnode’s research notes that other studies have attempted to assess holding behaviors such as issued exit age bands, HODL waves, and Bitcoin dormant states. According to Schultze-Kraft, the new variants will help researchers identify the industry’s interest groups.
“Our approach is to split the onchain activities into two main players in the industry: Short Term Holders (STH) and Long Term Holders (LTH),” writes Schultze-Kraft. “We categorize these two types of investors based on information about the age of the coin.”
Glassnode CTO: ‘Class of 2017, Hands of Steel’
This data gives the researchers statistics on the number of bitcoins that have not moved since a certain date. The report also notes that LTH bitcoins represent a large number of UTXOs:
Around 37% (~ 7 million) of the existing Bitcoin supply has not moved since the last ATH in December 2017. Likewise, more than half of the bitcoins in circulation (55%) have not moved more than a year ago since the market low in late 2018. These numbers clearly show that there are a significant number of investors who have committed to long term holders (LTH) for long periods of time.
Long-term owner of SOPR (LTH-SOPR). (Glassnode diagram).
On the other side of the spectrum, Glassnode highlights that the onchain transaction volume is 1 million BTC per day. Schultze-Kraft emphasizes that the researchers can conclude from this that “to a large extent, the same coins are transferred over and over in the network”.
MVRV (blue) and LTH-MVRV (orange). (Glassnode diagram).
By observing historical UTXO movements, Glassnode can also “calculate the probability that a UTXO will be issued based on its age / lifespan”.
“We therefore believe that if a UTXO exceeds a certain ballpark lifetime threshold of 100 to 200 days, those coins will be in the hands of market participants who are less susceptible to speculation and trading because of short periods of time – long-term owners,” the study notes.
“The other way around,” adds the study. “UTXOs that are issued earlier belong to short-term holders.” When defining LTH and STH data based on age, Schultze-Kraft writes that at least 155 days are considered Long Term Holders (LTH). In the meantime, “Short Term Holders (STH) are defined by all UTXOs with a lifespan of less than 155 days,” according to the “Breaking up Onchain Metrics” study by Glassnode.
Class of 2017, hands of steel. #Bitcoin https://t.co/eD8u5AL90E
– Rafael Schultze-Kraft (@ n3ocortex) March 15, 2021
Glassnode’s study emphasizes that behavior is important when it comes to Bitcoin spending and explains how certain market participants will react to some extent. As the price development of Bitcoin continues to impress, it is becoming increasingly important to evaluate how different market participants react to increased prices, ”explains Glassnode.
“Conversely, once a coin crosses our 155-day threshold to become a coin held by the LTH, it is increasingly unlikely that it will be statistically issued. Often times, it is only issued during volatility and at higher prices in bullish markets brought back to life, “says the Glassnode analyst Schultze-Kraft’s report.
What do you think of Glassnode’s report on long and short term owners? Let us know what you think on this matter in the comments section below.
Tags in this story
2017, 2018, Bitcoin, Bitcoin (BTC), Bitcoin Holders, BTC, BTC Holders, Charts, Data, Glass Node, Glassnode Report, Holders, Long Term Holders, LTH, Market Value to Realized Value, MVRV Ratio, Short Term Holders, SOPR Ratio, Spend Profit Ratio, Statistics, STH
Photo credits: Shutterstock, Pixabay, Wiki Commons, Coin Metrics, Glassnode,
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