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Unchained Capital Explores Bitcoin HODL Trends

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Unchained Capital Explores Bitcoin HODL Trends

Unchained Capital published a scientific study on Bitcoin HODL strategies and the ways HODLing affects the market. The study was posted on Medium on April 18, 2018, by Dhruv Bansal, co-founder, and CEO of the cryptocurrency lending startup.

Unlike traditional fiat-currencies and shares, public blockchain-based cryptocurrencies like bitcoin, log every transaction to date including the volume of the transaction and its date. As Bansal explained in this article:

“since Bitcoin stores its full transaction history in the blockchain, it is possible to look backwards and analyze the age distribution of UTXOs (unspent transaction outputs) over time.”

Insight into Existing HODL Strategies

To HODL or HODLing cryptocurrencies, is a strategy popularized by GameKyuubi from Bitcointalk.org in 2013. It is a trading strategy that involved holding cryptocurrencies for a long time, especially when the market is on long-term growth. The HODL strategy can be seen very clearly with Unchained Capital’s graph published within the study.

 

          Source: HODL Blog post

Unchained Capital’s graph is an interactive chart that displays the amount of bitcoin in existence, the market value, and the age of each token since the last transaction. “It’s not possible to make charts such as the one above for traditional asset classes,” said Bansal.

“It’s only Bitcoin and other public blockchains that meticulously track these data throughout their whole histories. This enabled post-hoc analyses of large-scale market behavior.”

Three Primary HODL Waves

The GENESIS HODL wave occurred from January 2009 to June 2011. The initial wave was due to a lack of mainstream appeal in the early days of cryptocurrency. The pattern initially shifted in mid-2010, going into 2011. The first bitcoin exchanges like Mt. Gox launched in 2010 while Bitstamp, Kraken, and Coinbase launched in 2011.

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Source: HODL Blog post

The GREAT HODL began in 2014 to December 2017. As bitcoin’s price crossed $1,000 in February 2017, almost 60 percent of bitcoin was older than 12 months. A year later in 2018, after bitcoin hit its peak at $19,660, only 40 percent of bitcoin was older than 12 months. During 2017, 20 percent of all bitcoins were transacted for the first time in years.

Source: HODL Blog post

The next HODL wave is from December 2017 to today. Unchained Capital’s data shows that there is already the development of another HODLING generation that will hold for the long haul. From January 2018, there are already six to 12-month-old bitcoins that have rebounded from a low of 7.76 percent to 14.63 percent.

Future of Bitcoin Price Remains a Mystery

As seen from Unchained Capital’s interactive graph, more than 37 percent of bitcoin has not changed hands in over 12 months with a further 14.6 percent not moving in the last six months. The above bitcoins are therefore being HODL’ed. Only seven percent of bitcoin has changed hands in the last week.

If historical trends are to repeat itself, investors will hold onto a significant fraction of bitcoin while the fall in bitcoin’s price recovers over a period. HODLers will be eager to sell when the price peaks and increases which may result in another decline in prices, repeating the HODLing cycle. Despite historical records, investors are often in a debate over the factors that influence bitcoin prices.

Unchained Capital will release another two editions of their findings which will focus on quantifying how much bitcoin is lost and analyze the UTXO (unspent transaction output over time) dust.

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