ATH, Moon, bear, FUD, HODL, FOMO, etc. are the familiar nomenclature in crypto. The peculiar psychological play is that we stay in euphoria when Bitcoin starts mooning and when BTC starts falling/correcting, the euphoria turns into despair. This type of psychological play is quite superficial in nature, as a result, market structure always becomes noisy for us. An informed choice helps to filter out such noise and give exposure to the trend backed by statistics and data.
Thanks to Blockchain technology, we have open access to the data, the immutable ledger, which can be audited by anyone. This data and its sampling can offer enormous insight into the market structure to assess the long-term trend. At the least, it can correct the psychological blockade and dilemma to assess a market, at least we can begin to reason why to invest in a crypto asset and the timing.
Out of the various popular nomenclature let's discuss HODL. HODL is nothing but holding the asset and forgetting it. For how long you forget defines its age. The market together with age decides the store of value for you. One of the popular concepts of crypto is its definite supply. The best crypto coins are defined by a limited defined number of total supply and deflationary inflation. A limited supply forms the very basic footing of demand of a coin, therefore since inception, its demand/supply curve has a tilt towards the demand side.
Different network adopts different model; the Bitcoin network uses the UTXO model, Ethereum network uses the Account model. In the UTXO model, Bitcoin remains in the protocol as UTXO. The difference between UTXO and Account model is how it is recorded and maintain the 'state', in other words, they differ in their bookkeeping.
As this article will focus on HODL with special reference to the UTXO age, I would prefer to do the onchain analysis on Bitcoin, and we will ascertain how over the years the hodlers of the long term have gone up and constantly building up.
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Source- Blockchain
UTXO- Unspent Transaction Output. In the Bitcoin accounting structure Bitcoin remains on the Blockchain as UTXO. When you send Bitcoin to another user, actually the entire UTXO is selected as the input(the input is fully consumed) in a transaction, and another unspent output is created as a result which can further be spent for future transactions. In simple words, UTXO takes the form of another UTXO or UTXOs, however, the resulting UTXOs can vary in their quantity. UTXO can not be spent partially. So even if you send a partial amount in Bitcoin, the protocol does not allow, hence the application(wallet) creates another UTXO(of the remaining amount) and sends it back to your wallet(in the form of a change address, which is another UTXO).
Now coming to the main topic discussion, i.e. UTXO age.
Let's say you purchase Bitcoin and hold it for 2 years, that means the UTXO age is 2 years. Similarly, if you hold it for 5 years, the UTXO age will be 5 years. In other words, UTXO age is how long it has been since it was last moved. The timestamp is a fundamental feature of Blockchain. From that timestamped data, the different UTXOs can be sampled together to analyze a definite pattern and trend. From that, we can plot the contour of the HODL wave.
Data Source: Intotheblock
Let's have a look at the 12 years of history of Bitcoin. The entire journey of Bitcoin has a very very strong and persistent build-up of BTC Supply (with UTXO-age for more than 5 years). In 2014 it started from 50 Bitcoin (UTXO-age more than 5 years) to now 4.41 million (Bitcoin-UTXO-age more than 5 years). In other words, more than 4.41 million Bitcoin have never moved for more than 5 years.
If we go retro( 5 years), there were two bull cycles, 2017 and 2021. These two bull cycles did not cause any massive off-loading of this BTC-UTXO-Age, in fact, the ever-rising contour of UTXO age(> 5 years) remains unabated by the extreme bull or extreme bear, you can say they dont care what the price tells about Bitcoin, they simply mean to remain invested in Bitcoin. They are the ones who upheld the value of Bitcoin, I must repeat I did not use the word "price". I said VALUE.
Source- Coinmarketcap
Furthermore, the total maximum supply of Bitcoin is 21 Million. Of which the circulating supply is 19.073 Million. As of June 2022, the total Bitcoin supply (UTXO age more than 5 years) is 4.41 million. That accounts for 23.12% of the circulating supply. The BTC supply (UTXO Age more than 5 years) has a smooth rising trend without any kinks. This contour is different for the UTXO Age- 1 year, 2 years, 3 years, etc. The lower age band has kinks and as we go to the lower age band, it becomes noisier.
Source- Intotheblock
The key observation from this HODL curve is that there has been an invisible silent mass(with UTXO age of more than 5 years) that keep on creating that HODL wave and keep on building a stable demand for BTC on a YoY basis. The steady rise of the UTXO Age(more than 5 years) is a strong statement for BTC to remain underpinned by the HODL wave in the long run. What you see in the short term is full of noise. But if your investment span is more than 4-5 years, then you definitely stand in a position to make the most from the store-of-value of Bitcoin.
The max total supply of Bitcoin is fixed(21 Million). The circulating supply(19.073 Million) is going to harden as it approaches closer to the max total supply(21 Million). But the UTXO Age(more than 5 years) is steadily rising(accounts for more than 23% at the moment). The demand side is refreshing the threshold with a firm footing of HODL with UTXO age of more than 5 years, and the supply side is getting saturated with each passing day. Such an asymmetric landscape will only favor Bitcoin bull in the long run.
Disclaimer:- This article is intended for educational and analytical purposes only. It should not be construed as financial advice. Thank you.
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