Just recently, the on-chain data and company Glassnode published a report describing the changes in Bitcoin’s Output Profit Rate (SOPR) and Market Value to Realized Value (MVRV) ratio. Glassnode analyst Rafael Schultze-Kraft explained the difference between long-term holders and short-term holders in order to analyze the behavior of such investors.

Evaluate Bitcoin consumer behavior

Since Bitcoin (BTC) reached a record high of $61,782 per unit, market prices have become more volatile. Currently, BTC is hovering at a level slightly above $55k, and it happened on the anniversary of March 12, 2020, when the market value to realized value (MVRV) ratio of Bitcoin dropped to 0.88.

BTC's ``Steel Hand''-37% of Bitcoin supply has not moved since 2017, and has been idle for 55% of the time after bottoming out in 2018

MVRV is basically a calculation that divides the market value by the realized value on a daily basis. When the two are combined, it can make people understand what “fair value” is.

Researchers at Coinmetrics show that after the MVRV ratio dropped to 0.88 on Black Thursday in 2020 (March 12), MVRV improved a later. “On March 12, 2021, it closed at $57,335, an increase of more than 10 times (1,000%),” explained Nate Maddrey and the Coin Metrics team.

Before the anniversary on March 12, 2020, the co-founder and CTO of Glassnode Rafael Schultze-Kraft, Published a report titled “Break the on-chain indicators for short-term and long-term investors.” In the report, Schultze-Kraft introduced new changes in SOPR (Expenditure Output Profit Rate) and MVRV ratios in order to evaluate long-term holders (LTH) and short-term holders (STH).

When MVRV calculates the gap between market value and realized value, SOPR is an of loss and profit. The guide issued by the Glassnode Academy points out: “The SOPR ( output profit rate) can represent the overall market profit and loss.”

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BTC's ``Steel Hand''-37% of Bitcoin supply has not moved since 2017, and has been idle for 55% of the time after bottoming out in 2018

published by Schultze-Kraft shows how the new variant classifies Bitcoin (BTC) by assessing holding behavior.

BTC's ``Steel Hand''-37% of Bitcoin supply has not moved since 2017, and has been idle for 55% of the time after bottoming out in 2018
The cumulative amount of dormant UTXO, in percentage. (Glassnode chart).

Glassnode’s research report pointed out that other studies have also tried to evaluate holding behavior, such as “consumption output age group”, “HODL fluctuation” and “Bitcoin dormancy” data. Schultze-Kraft said the new changes can help researchers identify industry stakeholders.

Schultze-Kraft wrote: “Our approach is to decompose on-chain activities based on two main industry stakeholders: short-term holders (STH) and long-term holders (LTH).” “We use token age information Classify these two types of investors.”

Glassnode CTO: “Class of 2017, Hand of Steel”

This data provides researchers with statistics on the number of bitcoins that have not been moved since a certain date. The report further stated that LTH Bitcoin represents a large number of UTXOs:

Since the last ATH in December 2017, about 37% (~7 million) of the existing Bitcoin supply has not moved. Similarly, since the market bottomed out at the end of 2018, more than half of the circulating bitcoins (55%) remained unchanged a ago. Obviously, these figures show that a large number of investors have been committed to long-term investments for a long time, namely long-term holders (LTH).

BTC's ``Steel Hand''-37% of Bitcoin supply has not moved since 2017, and has been idle for 55% of the time after bottoming out in 2018
Long-term holder SOPR (LTH-SOPR). (Glassnode chart).

On the other hand, Glassnode emphasized that on-chain transactions account for 1 million BTC per day. Schultze-Kraft emphasized that researchers can infer that “to a large extent, this is the same set of coins being transferred over the network again and again.”

BTC's ``Steel Hand''-37% of Bitcoin supply has not moved since 2017, and has been idle for 55% of the time after bottoming out in 2018
MVRV (blue) and LTH-MVRV (orange). (Glassnode chart).

In addition, by observing the historical movement of UTXO, Glassnode can calculate “the probability of UTXO varies with its age/lifespan”.

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“Therefore, our hypothesis is that if UTXO exceeds a certain service life threshold within a 100-200 day time frame, then these tokens will be in the hands of market participants, and they will not be easy to speculate on long-term holders in a short period of time. And trading, study notes.

The study added: “The opposite.” “The UTXOs used earlier are owned by short-term holders.” When defining LTH and STH data based on age, Schultze-Kraft wrote that at least 155 days are considered long-term holders (LTH). At the same time, Glassnode’s “Breakthrough on-chain Metrics” study shows that “all UTXOs with a holding period of less than 155 days are defined as “Short-Term Holders (STH)”.

Glassnode’s research emphasizes that Bitcoin’s consumption behavior is very important and explains how specific market participants will react to certain extents. As Bitcoin’s price performance continues to improve, it becomes more and more important to evaluate the reaction of different market participants to price increases.

“On the contrary, once a coin exceeds our 155-day threshold to become a coin held by LTH, it becomes increasingly impossible to use it for statistical data. It will usually only recover during volatility, and the price will be higher in a bullish market. The report by Glassnode analyst Schultze-Kraft emphasized this point.

What do you think of Glassnode’s report on long-term holders and short-term holders? Let us know your thoughts on this topic in the comments section below.

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