Research suggests that the age of coins being spent – in particularly the 1 year+ UTXO – is on the rise.
Holders are getting stronger: over half of all bitcoin hasn’t been moved in a year. 20% hasn’t moved for five years, and much of that may be lost. Delphi Digital uses this information to forecast the bottom of the market is close.
Before we go further, a quick definition of terms is in order. Every time bitcoins are ‘spent’ – i.e. moved – new outputs are created on the blockchain. These outputs are chunks of coins that may be combined in a new transaction, or sent individually; it doesn’t matter. Every bitcoin transaction has inputs – coins owned by the sender – and outputs, or the result(s) of that transaction. The outputs are known as Unspent Transaction Outputs, or UTXO.
The UTXOs used for a new transaction may have been sat in their addresses for just a few minutes, or they could have been hodler coins left dormant for years. Thanks to the nature of the blockchain, and the fact that every transaction is timestamped, we can gain some very interesting insights from the ages of coins being spent. For example, if a coin hasn’t moved for five years, you know the owner acquired it back when prices were a fraction of what they were today. It’s not a precise science, but it gives us a broad sense of the initial value of coins being moved. And that, in turn, gives us a sense of whether hodlers might be tempted to sell at current prices.
As overall UTXO age drops, this indicates greater transaction activity as holders move coins to sell. As it rises, this indicates more coins are being squirrelled away for hodling. Delphi’s insights from the previous bear market of 2014-15 suggest that as 1 year+ UTXO rises back above 50% (i.e. more than half of bitcoin hasn’t moved in at least a year), BTC put in a bottom soon after. And that’s where we are again now. Key conclusions from the report include:
- Selling pressure from long term holders, primarily those holding between 3-5 years, is almost exhausted.
- We’re seeing another accumulation process by longer term holders begin, similar to the one at the end of 2014.
- Using the timing of previous price bottoms relative to different bitcoin accumulation points, we are able to use current UTXO dynamics to strengthen our forecast of a rough date for a price bottom (sometime in Q1 2019).
Delphi use these patterns of coin movement to project the next cycle. Based on their findings, Delphi suggest the peak amount of 1-year+ holders in the next cycle will be around 68%. Using the growth rate of the slopes, they cautiously project that the peak of the next cycle will come in April 2020, just 15 months away, and will likely be aided by the May 2020 Halvening.
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