- ARK Invest and Glassnode have introduced a new framework called Cointime Economics for analyzing Bitcoin on-chain metrics.
- The framework introduces a new measure called the coinblock to represent the state of the Bitcoin network.
- Cointime Economics aims to improve valuation metrics and provide a new tool for measuring Bitcoin activity.
- Coins held for a longer time suggest ownership by long-term investors and display the behavior of experienced market participants.
- The coinblock is the basic unit used for calculation, determined by multiplying the number of Bitcoin by the number of blocks produced while the Bitcoin do not move.
- Coinblocks can be “destroyed” based on the length of time the Bitcoin was held, with longer-held Bitcoin producing a larger number of coinblocks destroyed.
- Cointime Economics provides a different perspective on the market compared to the traditional Unspent Transaction Output (UTXO) model.
ARK Invest and Glassnode have released a white paper proposing a new framework called Cointime Economics for analyzing Bitcoin on-chain metrics. The framework introduces a new measure called the coinblock, which aims to represent the state of the Bitcoin network. Cointime Economics can be used to represent Bitcoin’s economic state instead of the outstanding supply. The authors believe that this new method may improve valuation metrics and provide a new analytical tool to measure Bitcoin activity.
The reasoning behind this framework lies in the concept of coins held for a prolonged period of time. According to the authors, coins held for a longer time suggest ownership by the market cohort with the longest time investment horizon and the most profitable cost basis. These coins display the market behavior of experienced and knowledgeable market participants in Bitcoin’s history. Therefore, when long-dormant Bitcoins are moved, it is likely to be the action of hodlers and whales, making it more significant than actions involving newly mined Bitcoin.
The coinblock is the basic unit used for calculation in the Cointime Economics framework. It is determined by multiplying the number of Bitcoin by the number of blocks produced while the Bitcoin do not move. For example, since the Bitcoin network produces a block every 10 minutes on average, one coin generates approximately 144 coinblocks per day. Coinblocks are “destroyed” based on the length of time the Bitcoin was held. This means that if two Bitcoins had not moved in seven blocks and then transacted, 14 coinblocks would have been destroyed. The authors argue that longer-held Bitcoin produce a larger number of coinblocks destroyed, indicating higher activity by hodlers.
In contrast to the traditional Unspent Transaction Output (UTXO) model, which gives all Bitcoin equal weight, the Cointime Economics framework provides a different perspective on the market. The authors believe that their new method better represents Bitcoin’s economic state and may improve valuation metrics.
The white paper also provides three use cases to demonstrate the utility of Cointime Economics. A more advanced version of the paper for blockchain specialists is available from Glassnode, along with a suite of Cointime Economics metrics. ARK Invest is an investment management company founded by Cathie Wood, while Glassnode is a Swiss-based market intelligence service.