# Liveliness

Liveliness is a metric which provides insights into shifts in macro HODLing behaviour, helping to identify trends in long term holder accumulation or spending.

## Indicator Overview

Liveliness is a metric which provides insights into shifts in macro HODLing behaviour, helping to identify trends in long term holder accumulation or spending. It highlights periods where coin days are being destroyed at a rate faster than the global network is accumulating them.
Every day the network will accumulate one coin day per unit of circulating supply. Simultaneously, some of those coin days will be spent and destroyed in transactions, resetting the moved coins lifespan to zero. Liveliness is calculated by taking the ratio of cumulative coin days destroyed to the cumulative sum of all coin days ever accumulated by the network.
Liveliness to vary between a value of 1 for a protocol where every coin is spent at once, and 0 for a protocol where no transaction has taken place. Analysis of metric values between the theoretical extremes of 1 and 0 can generally be considered within the following framework:
• Liveliness will decrease when a high proportion of coin supply is dormant (i.e. HODLing behaviour) and the global coin day accumulation outpaces coin days destroyed in on-chain activity.
• Liveliness will trend sideways where coin days destroyed are equal to the coin days accumulated by the circulating supply.
• Liveliness will increase when long term holders begin spending old coins that have accumulated large volumes of coin days that exceed the rate of global coin day accumulation.
The Liveliness metric can also be used to assign relative weight and confidence over the value of market cap valuations. Liveliness will be close to zero for assets with low liquidity and poor adoption but high market cap (either through pre-mined coins or wash transactions of the same units).

## How is it measured?

Liveliness is defined as the ratio of the cumulative Coin Days Destroyed and the sum of all coin days ever created.
\begin{align*} \textrm{Liveliness} &= \frac{\textrm{Cumulative CDD}}{\textrm{Cumulative Total Supply}} \\[0.5em] &= \frac{ \textrm{value} \cdot \textrm{lifespan} ~{\color{gray}{\textrm{[blocks]}}} ~{\color{gray}{\textrm{(of all outputs ever spent)}}} }{ \textrm{value} \cdot \textrm{lifespan} ~{\color{gray}{\textrm{[blocks]}}} ~{\color{gray}{\textrm{(of all outputs ever created)}}} } \end{align*}

## User Guide

Liveliness is a metric that compares the aggregate activity on-chain to the global lifespan of the network. The metric author provides a succinct summary of the mechanism that drives Liveliness to vary between a value of 1 (high activity) and 0 (no activity).
"Liveliness would temporarily reach 1 if all coins would move within a single block and remain at 0 for a blockchain that have not yet had a transaction other than issuance. Liveliness will trend down for a blockchain with dormant units and up for a vivid ecosystem." Blummer, Liveliness of Bitcoin
As such, Liveliness can be interpreted from a number of angles:
• High values suggest relative to global lifespan, on-chain activity, adoption and utility are high.
• Low values suggest that relative to global lifespan, on-chain activity, adoption and utility are low.
• Increasing Liveliness and metric uptrends suggests expansion in on-chain activity and/or indicate dormant coins with large lifespans being spent back into the economy, increasing liquid supply. This is can often be associated with smart money realising profits on old coins.
• Decreasing Liveliness and metric downtrends suggest a reduction in on-chain activity and/or indicate that coins are entering a dormant state and maturing, removing liquid supply from circulation. This is can often be associated with smart money accumulating young cheap coins.

### Example Application

Liveliness is powerful tool for identification of market cycles. Under the assumption that smart money HODLers accumulate cheap coins and sell expensive coins, we can use the overall trend of liveliness to assess their spending/saving behaviour. The chart below shows:
• Bull Markets: HODLers spending expensive coins destroying accumulated coin days and leading to an uptrend in Liveliness (red)
• Bear markets: HODLers accumulating cheap coins increasing dormancy and leading to a downtrend in Liveliness (green)
• Re-accumulation: Balanced on-chain activity with coin days destroyed proportional to global coin day accumulation (blue)
The Glassnode Compare Tool may also be utilised to construct a simple 'Liveliness Ribbon' using the 30-day and 90-day moving averages. The Liveliness Ribbon has similar properties to the Difficulty Ribbon which tracks miner stress and expansion. The standard metric and the faster moving averages will expand upwards quickly in response to old coins being spent back into circulation, whilst slower moving averages will lag behind. This leads to ribbon expansion during periods where old coins are spent, and ribbon compression during periods of increasing coin dormancy.
• Scale: linear
• Moving Averages: none (default) with 30-day and 90-day in a ribbon via Compare Tool