Realized Cap HODL Waves

Realized Cap HODL Waves is a variant of HODL Waves that weighs active supply bands by their realized USD value (economic weight) as a proportion of the Realized Cap.

Indicator Overview

Realized Cap HODL Waves present a macro view of the distribution of age and economic weight of the coin supply. The thickness of each age band is established by calculating the total realized value of coins in each age band as a proportion of the Realized Cap. This provides insight into the relative economic weight stored by coins of various holding times, and changes arising from holding and spending behaviour.

The distinction between HODL waves and Realized Cap HODL waves may be though of as follows:

HODL waves consider the relative proportion of BTC supply in various age brackets to the circulating BTC supply.
- A 1y-2y age bracket with a value of 5% indicates that 5% of all coins are aged between 1y and 2y.
Realized Cap HODL waves consider the economic weight (USD realized value) of the coin supply in various age brackets, relative to the Realized Cap (total realized value of coin supply).
- A 1y-2y age bracket with a value of 5% indicates 5% of the Realized cap USD value is derived from coins aged between 1y and 2y.

Realized Cap HODL Waves provide unique insight relative to the HODL waves in that it:

Combines coin age and economic weight into a single metric and accounts for changes in market valuation over time.
Minimizes the importance of very old or lost coins last moved at very cheap prices, thus providing a viewpoint that focuses on active, and economically meaningful supply.
Provides a more dynamic / responsive perspective for looking at coin distribution, whereas the original HODL Waves tend to present a slower / smoother chart.

Realized Cap 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.

Video Guide

How is it measured?

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

\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*}

The coins that fall within an active supply band are then multiplied by their respective Realized Prices (price when the UTXO was created) in order to provide the combination of (1) age and (2) economic value.

\begin{align*} \textrm{Realized Active Supply} = \textrm{Active Supply * Realized Price}~&{\color{gray}{\textrm{(for each coin within age band)}}} \end{align*}

Each Realized Active Supply band is then weighed in relative proportion to the Realized Cap:

(Realized\ Cap\ HODL\ Wave)_{age\ band} = \frac{(Realized\ Active\ Supply)_{age\ band}}{Realized\ Cap}

Realized Cap HODL Waves aggregates and stacks the following active supply bands in relative proportion to the Realized Cap:

<1d
1d-1w
1w-1m
1-3m
3-6m
6-12m
1-2y
2-3y
3-5y
5-7y
7-10y
10yr

User Guide

Realized Cap HODL Waves provide a macro view of (1) the age of coins and (2) their relative economic weight as a proportion of the Realized Cap. In a way, it can be thought of as the USD weighted equivalent to the HODL Waves (which are BTC weighted), where the USD value of the coin is based on when the coin last moved. This provides a macro gauge on the balance between coin maturation, spending, and 'stored value' held by various group of market participants.

It can also indicate where changes in this age distribution occur as the thickness of Realized Cap HODL wave bands change in response to dormant coins maturing, or when old coins are spent, resetting their age into the youngest category, and revaluing to the current price. This metric can also be used in conjunction with Realized Profit and Realized Loss to assess the age of spent coins, and the potential capital inflows/outflows to the market as a result.

Indicator Signals

In general, we can classify sets of coins based on a broad view of 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 decrease as their realized value is often at substantially cheaper prices, despite the UTXOs often holding large BTC coin volumes.
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 observed 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. These bands can be used to identify bearish and bullish market cycles as they swell and shrink, respectively.
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 in response to market volatility. These colour bands tend to oscillate in reverse to old coins, swelling in bull markets as old coins are spent, and shrinking as young coins become dormant and mature during bear markets and accumulation.

Example Applications

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

Young Coin Behaviour

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.

As bull markets progress, long term holders spend (and likely sell) their coins. These spends result in old coins recategorizing into young coins, and with a higher Realized Price (i.e. the price the coin last moved). A higher economic weight carried by younger, more liquid coins results in the following findings in the Realized Cap HODL Wave chart:

Distribution tops occur when young coins (<6 months) are valued at 80%+ of the value of the Realized Cap. This indicates newer buyers hold a large proportion of the economic value, creating increased probability of oversupply and a market top.
Accumulation bottoms occur when young coins (<6 months) are valued at <40% of the value of the Realized Cap. This indicates buyers of coins during the bull cycle have either capitulated, or still hold onto the coins showing conviction. Smart money investors accumulate younger coins, and keep their older coin holdings dormant.

Old Coin Behaviour

The chart below presents a view where all coins younger than 6 months are turned off making the proportion of old, unmoved coins stand out clearly.

As bear markets progress, younger unspent coins mature and recategorize into older coins, usually accumulated by smart money, higher conviction buyers. During this period the economic weight carried by older coins increases forming growing market support. This dynamic yields the following findings in the Realized Cap HODL Waves chart:

Accumulation bottoms occur when old coins (>6 months) are valued at 60%+ of the value of the Realized Cap.
Distribution tops occur when old coins (>6 months) are valued at <20% of the value of the Realized Cap.