HODL Waves

HODL Waves present a macro view of the age distribution of the coin supply and provides insight into changes to this age distribution arising from holding and spending behaviour.

Indicator Overview

HODL Waves present a macro view of the age distribution of the coin supply and provides insight into changes to this age distribution arising from holding and spending behaviour. The metric bundles the coin supply into categories depending on age, and presents it in colour bands with a thickness proportional to the total coin supply.

HODL Waves thus provide a macro view of both the age distribution of the existing supply, and of changes to this distribution as coins mature and are spent. Changes in coin maturity as a result of spending or accumulation behaviour will be reflected in changes in HODL Wave band thicknesses over time.

HODL Waves can generally be considered within the following framework:

  • Thickness of HODL wave bands represents the proportion of the total coin supply that is categorised into that age band.

  • Accumulation and HODLing behaviour will result in coin maturation (young to old) as an increased proportion of coins move from younger age bands (warm colours) into older age bands (cool colours). This indicates an increased long-term conviction to accumulate and hold the asset and an associated decrease in liquid circulating supply.

  • Spending old coins back into the economy (old to young) will result in the proportion of warmer colour bands increasing. This may suggest a reduced long-term conviction to hold the asset and an increase in liquid circulating supply as old coins are re-activated after a period of dormancy.

  • Spending young coins will reclassify them as young coins with immediate effect on the younger age band volume.

  • Maturation of young coins into old coins will always be delayed by the time for coins to reach the lower bound of the older age bracket before they are reclassified into new HODL wave bands.

More detailed analysis on particular sub-sets of age bands can be achieved by turning off/on different legend items.

How is it measured?

Active supply bands are measured by calculating the number of coins that have been transacted within the specified time window.

Active Supply=value (of all UTXOs where ttcreated is in selected age band)\begin{align*} \textrm{Active Supply} = \textrm{value}~&{\color{gray}{\textrm{(of all UTXOs where}}} \\ &{\color{gray}{~\textrm{$t - t_\textrm{created}$ is in selected age band)}}} \end{align*}

HODL Waves aggregates and stacks the following active supply bands in relative proportion to the total coin supply:

  • <1d

  • 1d-1w

  • 1w-1m

  • 1-3m

  • 3-6m

  • 6-12m

  • 1-2y

  • 2-3y

  • 3-5y

  • 5-7y

  • 7-10y

  • >10yr

Video Tutorial

User Guide

HODL Waves provide a macro view of the age of coins as a proportion of total coin supply. This provides a gauge on the balance between short term and long term holdings. It can also indicate where changes in this age distribution occur as the thickness of HODL wave bands change in response to dormant coins maturing, or when old coins are spent, resetting their age into the youngest category.

The metric can be utilised for both aggregate big picture analysis and also for detailed analysis of a specific sub-set of spending behaviour.

In general, we can classify a few larger sets of coins based on their age brackets:

  • Lost or Ancient Coins (dark cool colours): Coins older than 5-years are very rarely spent and in many instances are assumed to be either lost, or discounted from freely circulating supply. Over time these age colour bands tend to steadily increase as lost coins will continue to mature in perpetuity.

  • Old Coins (cool colours): Coins that are older than 1-year up to 5-years old are often assumed to be owned by HODLers/smart money investors. These entities are often assumed to accumulate cheap coins in bear markets, HODL in cold storage for long periods of time and then sell expensive coins into bull market strength. Older colour bands tend to oscillate in thickness over market cycles, swelling after periods of accumulation and thinning out as coins are spent.

  • Young Coins (warm colours): Coins younger than 6 months are generally considered young coins which also make up the majority of day-to-day transaction volumes. Many young coins are held by both speculative short term investors/traders and are the most likely to be re-spent many times, thus remaining young. These colour bands tend to oscillate in reverse to old coins, swelling as old coins are spent and shrinking as young coins become dormant and mature.

  • HODLers will accumulate a portion of young coins and transfer them into cold storage where they gradually mature. There will be a time lag between this accumulation and swelling of older age colour bands. This time lag will be equal to the lowest age of each category bracket and thus interpretation of coins maturing should consider this time offset.

Example Application

The legend items for the HODL waves can be clicked and turned on/off for more detailed analysis of specific coin age categories of interest.

Young Coins

The chart below presents a view where all coins older than 6 months are turned off making the proportion of young, recently moved coins stand out clearly.

We can see that particularly around bull market peaks, there is a marked increase in young coin supply as older coins are spent and profits realised into market strength. This provides insight into the times when smart money investors with long time horizons are spending and re-activating dormant coins. This may increase the liquid circulating supply if those coins are sold.

It is important to note that the spending of old coins will have immediate effect on the thickness of the youngest coin HODL wave colour band.

Old Coins

The chart below presents a view where only coins aged between 1-year and 5-years are turned on to demonstrate the oscillation of coin dormancy between cycles. Here we ignore ancient and lost coins (>5yrs) given their low probability of being spent back into circulation. We also ignore young coins to make changes in older coin supply clearer.

Old coin supply bands tends to peak in the during and following bear markets and into early bull markets due to the maturation time lag.

  • Yellow 1yr to 2yr brackets will start to increase first as coins accumulated during the early bear market begin to mature.

  • Green 2yr+ bands then swell a year later until these HODL waves start to decline as old coins are spent into bull market strength. This represents the realisation of profits by long term holders and smart money investors.

Unlike young coins, the maturation of coins into older colour bands will always be offset by the lower bound age of the bracket. For example, swelling of the 2 to 3-yr age band due to a large coin withdrawal will only commence 2-years after the coins were moved. As such interpretation must account for this time offset in each age bracket under consideration.

  • Default for aggregate overview of HODLing behaviour.

  • Turning off and on various lifespan categories for more detailed insights.


Coined By

Dhruv Bansal, Unchained Capital (April 2018)

Further Resources

Dhruv Bansal - Bitcoin Data Science (Pt. 1): HODL Waves

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