Thread by @Delphi_Digital

0/ Using UTXO age dynamics across market cycles, we attempt to time a price bottom for #Bitcoin by understanding when selling pressure from long term holders will wane. Our analysis suggests a likely bottom for $BTC in Q1’19 (see report for detail)
delphidigital.io/utxo

1/ This analysis expands on the key takeaways we provided within the Short Term Outlook of our State of Bitcoin report (released last month). You can view our thread summarizing the report as well as the full report itself here:

https://twitter.com/delphi_digital/status/1072248572433915909?s=21

2/ The green line represents the % of bitcoin that hasn’t been moved in at least 1 year. Box 1 indicates the period of rapid growth of bitcoin that hasn’t moved in at least a year (hodlers) while box 2 shows the price at which that bitcoin was last moved (people buying the rally)

3/ Long term holder accumulation accelerates during price rallies as excitement leads to a rapid influx of new users/additional money. This often occurs deep into a rally, which is typically followed by a significant price reversal, creating “bag holders” & new enthusiasts alike.

4/ Now we introduce lines that represent coins that haven’t been moved in 3-6 months(1) and 6-12 months(2). In both instances you can see the untouched coins shift from the 3-6 month line to the 6-12 month line, and then eventually into the 1 year+ UTXO line(3).

5/ A coin can only shift bands in two ways: either to the adjacently older band as it remains untouched, or to the youngest band if it has moved wallets. In other words, declines in any UTXO line can happen immediately, while growth is lag dependent on the time frame.

6/ Applying this logic to the recent cycle, we can get an idea of the source of selling pressure and how close we are to selling exhaustion. We need to analyze the bands that make up the 1 Year+ UTXO line, which we breakout into 1-2 Years, 2-3 Years, 3-5 Years, and 5 Years+.

7/ Based on the points below, we can presume that most selling came from 3-5 Year holders. An important understanding that allows this to work is that a large portion of the coins in the 5 year+ band are lost. Please refer to the full report for an explanation of each assumption.

8/ Another important takeaway is we can assume these older owners have exhausted much of their selling efforts, evident in the flattening of these older UTXO bands, coupled with the 1 Year UTXO band reaching a floor and staying flat through the first half of 2018.

9/ In the second half of 2018, the 1 year UTXO band began to exhibit a positive growth trajectory directly in tandem with the 1-2 Year band as older UTXO bands remained flat. We’re seeing an accumulation process similar to the end of 2014. This would imply a bottom is in sight.

10/ We use historical price cycles to find logical & consistent trends in order to forecast the timing & UTXO composition of the next cycle. For the 1 year peak holding rate, we looked at how the wave height of the 6-12 month line affected the 1 Year+ line in the previous cycles.

11/ There are strong consistencies across both years when comparing these metrics. Both, the 2012 and 2014, 6-12M wave heights were ~65% of the corresponding 1 year wave height that year. A similar analysis was performed to calculate the end of the high growth period.

12/ With this data, we can estimate the date of these events. A uniformity across both cycles was the slope from the base of the 1 Year+ line to its peak. The trajectory of this UTXO line is not linear, but the low and high points of each cycle can be plotted on a similar slope.

13/ The date and UTXO floor holding rate, which will occur during the next selloff, are the remaining factors that are needed to complete the cycle. It's difficult to be confident in a forecast this far out, but our estimates have the next UTXO floor occurring in Q4 2022.

14/ We tracked the price bottom relative to the 6-12M holding peak(1), the forecasted 1 year+ holding peak(2), the existing 1 year+ holding bottom(3), and the forecasted slowdown point of the 1 Year+ growth rate(4), resulting in a cluster of dates indicating a bottom in Q1’19(5).

15/ From a high level, the results of this analysis are also supported by trends in valuation multiples like the rapidly declining NVTS (covered in The State of Bitcoin), and infrastructure tailwinds like the launch of Bakkt and Fidelity's custody solution.

16/ The purpose of this analysis is to provide insight on bitcoin holder patterns. We don’t believe this analysis should function as an indicator on its own, but rather that it be used in combination with other relevant data to make the most informed decision possible.

17/ We want to give a special thanks to the @unchainedcap team @dhruvbansal @morrow_nelson for their Hodl Waves piece which served as a foundation for this analysis. blog.unchained-capital.com/bitcoin-data-s…

18/ Also, thanks to everyone who provided feedback as we put this together, incl. @TuurDemeester @MustStopMurad @hasufl @matt_odell @MartyBent @Crypto_Macro. Read the full report here & please don't hesitate to reach out to our team with any feedback!
delphidigital.io/utxo