On-chain Data Academy (6): A new trap, the miraculous pricing methodology of BTC researched by ARK (I)

This article is the sixth article in the On-Chain Data Academy series, with a total of 10 articles. Articles 6 to 8 will be Cointime Price series articles, which are much more advanced than the first five, if you are reading the "On-Chain Data Academy Series" for the first time and want to learn on-chain analysis knowledge, it is recommended to start reading from the first five. (Synopsis: On-Chain Data Academy (1): Do you know what the average cost of BTC in the whole market is? (Background supplement: On-chain data academy (2): Hodlers who always make money, how much does it cost them to buy BTC? TLDR Cointime Price series will be divided into three articles, this is the first This article will introduce the basic principle of Cointime Price and the application of bottoming Cointime Price is a new and efficient BTC pricing method Stricter than Realized Price and more sensitive than LTH-RP Cointime Price Basics Introduction The concept of Cointime Price originated from 2023 / 08 / 23, presented in the "Cointime Economics" produced by Ark Invest and Glassnode. The calculation logic of Cointime Price itself is relatively complex, and this article will try to explain it to you in a simple way. Cointime Price is a pricing model designed for BTC's unique UTXO structure, and in this article, I'm going to go beyond the complex calculation process and go straight to the principle. To put it simply, since BTC itself is a blockchain, there will be a verification process whether it is producing blocks or transferring transactions. Cointime Price is different from the traditional on-chain pricing method, using a "time-weighted" approach: As shown in the figure above, the green line is the Cointime Price, and the calculation formula is shown in the figure. There are three concepts involved: Coin Blocks Created (CBC) CBC in the nth block = BTC in circulation at that time Coin Blocks Destroyed (CBD) When the corresponding amount of BTC is transferred, it is determined to be destroyed, and the number of BTC transferred is multiplied by the time these BTCs are held (how many blocks have passed before the transfer) to obtain CBD, where CBD can be interpreted as " The amount of BTC weighted by time "Coin Blocks Stored (CBS) CBS = Sum of CBCs – The sum of CBD, which can be understood as "the weighted amount of BTC time not spent" In the figure above, the numerator of the formula is to multiply the CBD produced at each transfer by the corresponding amount and add up. Based on the above, three characteristics of Cointime Price can be derived: Because of the time-weighted design, when long-term holders transfer (distribute) in large quantities, the rate of change of Cointime Price will increase Because the transaction is one buy and one sale, from the buyer's point of view, the numerator in the formula can also be regarded as the "total amount of time-weighted spending" in the current market; Divide this value by CBS to get the "average cost of time-weighted chips on the field" Because CBD takes into account the transfer behavior, CBD will not be generated without transfer, so it effectively excludes the impact of lost chips in ancient times Comparison with LTH-RP In a previous article, I introduced LTH-RP, which is simply the average cost of buying BTC by long-term holders. Since Glassnode's definition of LTH is "chips held for > 155 days", a relatively crude definition can only be given for "long-term"; Cointime Price, on the other hand, directly considers "how long the chip was held when the transfer occurred", so Cointime Price is more accurate and sensitive than LTH-RP. As shown in the figure above: every time the main ascending wave comes, Cointime Price can always react one step ahead of LTH-RP, which can indicate the occurrence of distribution behavior in real time. Therefore, in terms of analysis, I actually prefer to use Cointime Price to analyze the market. As mentioned earlier, Cointime Price is a time-weighted way to make a fair price for BTC. That being the case, once the market price falls below the Cointime Price, it means that the market price is already lower than the true value of BTC, which is usually a good time to dip. As shown in the figure below: I marked the time point when the BTC price was lower than the Cointime Price in history, and I can see that the corresponding are good entry opportunities. Conclusion The above is all the content of the on-chain data academy (6), and there will be two detailed teachings for Cointime Price in the future, readers who are interested in learning more in-depth on-chain data analysis, remember to follow this series of articles! If you want to see more on-chain data analysis and teaching content, please follow my Twitter (X) account! Hope this article helps you, thanks for reading. Related Stories On-Chain Data Academy (3): Have the makers at the bottom made profits? On-Chain Data Academy (4): Visual BTC chip price distribution map On-chain Data Academy (5): How many people are earning? Take you through the objective sentiment indicator PSIP! "On-Chain Data Academy (VI): A New BTC Magic Pricing Methodology with ARK Research (I)" This article was first published in BlockTempo's "Dynamic Trends - The Most Influential Blockchain News Media".