Just recently, the onchain data and research company Glassnode published a report that introduces variations of Bitcoinâ€™s Spent Output Profit Ratio (SOPR) and Market Value to Realized Value (MVRV) Ratio. Glassnode analyst, Rafael Schultze-Kraft, explains the difference between long-term holders and short-term holders in order to analyze the behaviors of these types of investors.
Assessing Bitcoin Spending Behaviour
Ever since bitcoin (BTC) touched an all-time high at $61,782 per unit market prices have been a bit more tumultuous. Currently, BTC is hovering just above the $55k handle and it happened awfully close to the anniversary of March 12, 2020, when Bitcoinâ€™s Market Value to Realized Value (MVRV) Ratio dropped to 0.88.
Basically an MVRV is a calculation that divides market value by realized value every day. It can give someone a sense of what the â€œfair valueâ€ just might be when looking at the two combined.
Researchers from Coinmetrics show that after the MVRV ratio dropped to 0.88 on â€˜Black Thursdayâ€˜ 2020 (March 12), one year later the MVRV has improved. â€œOn March 12th, 2021 it closed at $57,335, a gain of over 10x (1,000%),â€ explains Nate Maddrey and the Coin Metricsâ€™ team.
Prior to March 12, 2020â€™s one-year anniversary, Glassnodeâ€™s cofounder and CTO, Rafael Schultze-Kraft, published a report called â€œBreaking up Onchain Metrics for Short and Long Term Investors.â€ In the report, Schultze-Kraft introduces new variations of the SOPR (Spent Output Profit Ratio) and the MVRV ratio, in order to assess long-term holders (LTH) and short-term holders (STH).
As MVRV calculates the divide between market value and realized value, SOPR is an indicator for observing loss and profits. â€œThe SOPR (Spent Output Profit Ratio) indicator acts as a proxy for overall market profit and loss,â€ a study guide published by Glassnode Academy notes.
The study published by Schultze-Kraft shows how the new variations can categorize bitcoin (BTC) by assessing holding behaviors.
Glassnodeâ€™s research notes that other studies have tried to assess holding behaviors like Spent Output Age Bands, HODL waves, and Bitcoin Dormancy figures. The new variations Schultze-Kraft says helps researchers identify industry stakeholders.
â€œOur approach is to break up onchain activity according to two major industry stakeholders: Short Term Holders (STH) and Long Term Holders (LTH),â€ Schultze-Kraft writes. â€œWe categorise these two investor types using information on coin age.â€
Glassnode CTO: â€˜Class of 2017, Hands of Steelâ€™
This data gives the researchers statistics on the number of bitcoins that have not moved since a certain date. The report further notes that LTH bitcoins represent a great number of UTXOs:
On the opposite side of the spectrum, Glassnode highlights that onchain transaction volume accounts for 1 million BTC per day. Schultze-Kraft highlights that the researchers can infer that â€œto a large extent it is the same set of coins that are being transferred in the network over and over again.â€
Furthermore, by observing historical UTXO movements, Glassnode can calculate the â€œprobability of a UTXO being spent as a function of its age/lifespan.â€
â€œThus, our assumption is that if a UTXO exceeds a certain lifespan threshold in the ballpark of 100â€“200 days, those coins are in the hands of market players that are less prone to speculate and trade based on short timeframesâ€Šâ€”â€ŠLong Term Holders,â€ the study notes.
â€œConversely,â€ the study adds. â€œUTXOs that are spent earlier, are owned by Short Term Holders.â€ When defining LTH and STH data based on age Schultze-Kraft writes that a minimum of 155 days is considered a Long Term Holder (LTH). Meanwhile, â€œShort Term Holders (STH) are defined by all UTXOs with a lifespan of less than 155 days,â€ Glassnodeâ€™s â€œBreaking up Onchain Metricsâ€ study suggests.
Glassnodeâ€™s study stresses that bitcoin spending behaviour is important and it explains how specific market participants will react to a degree. As Bitcoin price performance continues to impress, it becomes increasingly important to assess how different market participants are reacting to elevated prices,â€ Glassnode details.
â€œConversely, once a coin passes our 155 day threshold to become a LTH held coin, it is increasingly unlikely to be spent on a statistical basis, often only coming back to life during volatility and at higher prices in bullish markets,â€ Glassnode analyst Schultze-Kraftâ€™s report emphasizes.
What do you think about Glassnodeâ€™s report on long-term holders and short-term holders? Let us know what you think about this subject in the comments section below.
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