{ "episodeId": "SLP510", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "is_on": { "name": "Is On", "role": "guest", "tag": "IS" } }, "segments": [ { "speaker": "stephan", "time": "00:09", "start": 8.55, "text": "Hi, you're listening to the Stephan Livera podcast, a show about Bitcoin and Austrian economics brought to you by Swann dot com. I'm recording this from Riga, Latvia at Baltic Honey Badger. This episode is my discussion with James Check, aka Checkmatey, and we're talking about on-chain analytics, whether it's snake oil and a new framework and research report called CoinTime Economics. We talk about a range of- of things that I think listeners will find interesting, such as analyzing the Bitcoin market cycles, Bitcoin hodler psychology, lost coins, the impact of the proverbial DCA army, and where we are now. Here's my chat with James. James, welcome to the show." }, { "speaker": "is_on", "time": "00:46", "start": 45.8, "text": "G'day, Stefan. Great to be here, mate." }, { "speaker": "stephan", "time": "00:48", "start": 47.6, "text": "Yeah, so I saw what you've been doing with CoinTime Economics, and, you know, we're gonna get into all this stuff, but let's just, you know, super brief background just on yourself, just for people who don't know you." }, { "speaker": "is_on", "time": "00:59", "start": 59.03, "text": "Yeah, absolutely. So, I'm Sydney born and bred, if you can't tell by the accent. you know, we get a lot of work done down here. But, now So that was kind of my background and, what, what I was kind of formally educated in. I discovered not Bitcoin, but shitcoins in twenty eighteen and, paid my tuition as we all have to do. but in twenty eighteen, I really got fascinated with markets, right? I'm losing stacks of money, but there's something about the way that prices and markets moved that just fascinated me. And, anyway, on-chain data started to evolve, in around that time, kind of late twenty eighteen, and, what it to me represented was Most of what I did in, in engineering was taking big data sets and visualizing the problem. And, what I'd certainly learnt about markets is, it's, I mean, what is the price chart? It is human fear and greed plotted against time. And, you know, essentially we can start using on-chain data to actually visualize these patterns. and at the end of the day, all of these things are kind of decisions that people make. And in order to imprint your decision on the Bitcoin ledger, you have to pay a fee, you have to burn energy," }, { "speaker": "is_on", "time": "02:14", "start": 134.14, "text": "Ledger and put an entry in there without exerting some kind of decision. There is an active decision in the whole thing. so anyway, that was kind of where I started, started learning about the, the on-chain side, and, I joined the, Glassnode team as a lead analyst in, in February twenty twenty-one, right at the top, and, have essentially been studying this animal the whole way down." }, { "speaker": "stephan", "time": "02:34", "start": 153.75, "text": "Yeah. Okay. And so I think the initial skepticism, I'm sure lots of listeners will have, is they have seen" }, { "speaker": "stephan", "time": "02:44", "start": 163.96, "text": "Have been, you know, in some cases because maybe they had a product to sell you, or in other cases because maybe they were using it to sort of drive this kind of bullish opium sort of narrative, like it, the, the perception. Now, that may be right or wrong, but the perception was, oh, some of these on-chain analysts guys, they just kind of use it to post bullish things and get engagement off of that, and then sell some products off of that, right? That, that's probably one of the perceptions of it, and I think, Question, how much of on-chain analytics is real?" }, { "speaker": "is_on", "time": "03:18", "start": 198.14, "text": "Yeah, no, great question, and pretty much everything you described is very real, right? And as with all things in life, there's snake oil salesmen who sell you, you know, laptops and, technical analysis and all sorts of stuff, right? The world is full of people who, for rightly or wrongly, and the, in the world of on-chain, rightly or wrongly, people are good or bad at their job, right? People who spend a lot of time and do what I would call the proof Data, are always gonna be more adept and capable. Now, as with a lot of these things, are the most capable people the loudest on Twitter? And not really. the folks who generally like to, you know, shout and scream. So what happens is, a-and you know, there's, there's various pricing models I think did, did slightly worse damage. sure the audience can probably allude to what I'm talking about. but look, a-a-as with all things, on-chain is very, very young, right?" }, { "speaker": "is_on", "time": "04:14", "start": 253.96, "text": "It really only started in two thousand and eighteen, and we've been essentially exploring what this thing can do ever since. Now, every single week, we do a newsletter, and that's a bit of a forcing function actually, because there's nothing quite like learning and doing stuff in public. and what we've done over the last, I mean, since February twenty twenty-one, is learnt about how to use these tools, what do they mean, where's the signal, where's the noise in a live fire exercise, right? We look at the week, we look at what actually happened, Tools. now there's no question, there's some metrics that you just wouldn't use, right? Or they're, you know, there's not really a great deal of value to them. But there's a bunch of other metrics which are impressively, impressively useful. And where does this come from? As I mentioned before, it's human decisions. it's baking in our market psychology. This is the most important thing for people to take away. Price is market psychology. It is fear, greed, profit, and loss. Those four components are what drives people to make decisions." }, { "speaker": "is_on", "time": "05:14", "start": 313.94, "text": "I don't realize this, but there's hundreds of millions, two billions flowing into exchanges and out. In fact, we did a report yesterday that shows that fifty percent of all Bitcoin transaction volume is either to or from an exchange. So every single one of those transactions, deposits and withdrawals, is imprinting information about when the person bought their coin, how much profit they locked in, how much loss. And the funny thing is that we, we do this stuff the same all the time, right? People capitulate at the bottom every cycle, people buy the top in droves every cycle. So all of these collective decisions get baked into the data. So really, it's just another way to visualize, price and mechanics. And, you know, if you ask any tradfi guy, hey, if you could look at money flowing through the SWIFT network and see who did it, when they did it, how much they sent, how much profit, how much loss, do you reckon you could pull some trading indicators out of that? If anyone says no to that, they're kidding themselves." }, { "speaker": "stephan", "time": "06:05", "start": 364.59, "text": "I see. So let me summarize that then as, yes, they are, That can at least tip the odds in your favor. I think it's like, you know, like a poker player might, you know, go all in with aces and still lose to the guy who goes all in with two sevens, but the probabilities are you have to, you, you-- if you're playing this game, you're playing the probabilities, and there are certain indicators that you would argue can tip your-- tip the odds in your favor, even if you're not gonna be a hundred percent correct every time." }, { "speaker": "is_on", "time": "06:36", "start": 395.87, "text": "Correct. It's all about probabilities, right? It's about understanding what the" }, { "speaker": "is_on", "time": "06:44", "start": 403.96, "text": "The market is doing at scale, then I can start making decisions. And, there's probably two things that are really unique about on-chain that just don't exist in traditional finance, and CoinTime Economics is really built off one of, in fact, both of them, but certainly one of them, and that is price stamping and time stamping. So for every UTXO, we have a time when that UTXO was created, and we have a time when it was destroyed, or if we're evaluating today, how long it's been held for. And likewise," }, { "speaker": "is_on", "time": "07:14", "start": 433.98, "text": "Yes. Now, on an individual basis, yeah, sure, someone buys their coin on an exchange at twenty thousand and they withdraw it at twenty one, right? Or they withdraw it at nineteen. Yes, there's deltas. But over the grand scheme of things, when you take a big broad picture average, many of those error bars actually collapse to be quite small, and then once you overlay very simple models, you know, is it a one sigma move? Is it a two sigma move? Is this thing out of bounds on a statistical basis? What does the general running history of this metric look like As any, economic analysis or market analysis would do. But really, it's that, it's that timestamping and the price stamping, and then you aggregate all that information together, you can see capital flowing in, capital flowing out, wins, losses, fear, greed, the whole lot. You start looking at human decisions, and, it really comes off of those two, really, really unique components." }, { "speaker": "stephan", "time": "08:05", "start": 484.85, "text": "I see. So, yeah, let's talk a little bit about the history. We won't go too, too deep into it, but as I understand," }, { "speaker": "stephan", "time": "08:14", "start": 494.02, "text": "I think his name's John Ratcliff. he, he wrote some kind of early stuff analysis on this idea, and of course, Thomas Blumer, who also pioneered, liveliness and a few, of these ideas. So do you wanna just touch on, some of the history and then what you're building onto that?" }, { "speaker": "is_on", "time": "08:30", "start": 510.27, "text": "Absolutely. So, well, I think one of the very first on-chain metrics was the Bitcoin Day Destroyed, which is back-- it was Bytecoin, introduced it back in twenty eleven. And this is-- the Has become the coin day destroyed, and now in coin time economics is now the coin block, which we'll talk about. But, the concept here is let's measure the holding time, right? What is the real economic value of a coin being held? And if we think about this from one perspective, right, I don't really mind, it's not really useful information if someone who bought their coin yesterday spends it tomorrow, it's kind of an expected result. What if the hodlers who've held their coins for five years start spending, and they flush a lot of time out Because these are high conviction, well informed investors, they understand the macro flow of Bitcoin, and it's telling you something about their conviction. And also, supply that the market has discounted, it's kind of gone dormant, comes back into the market. so that was twenty eleven. a-as we come into, I think probably where on-chain analysis really, kind of exploded, that first wave, I think, was twenty eighteen, which is when the, the realized cap was produced. And the realized cap is basically looking at all of the coins in the supply based on the price when they last transacted, and if you look at that across the whole market, you get the average cost basis, right? Well, at least up until CoinTime Economics, that was our assumption, it's the cost basis of the market, in the realized price. and again, if you think about the whole market, right? There's gonna be a psychological importance of this cost basis model. It's where people, I mean, people like to either get their money back in a bear market, right, sell the rip, give me my money back," }, { "speaker": "is_on", "time": "10:12", "start": 611.99, "text": "or These market, gyrations around those levels. and then Timas, so again, late twenty eighteen, Timas, ca-- and he came up with Liveliness, and Liveliness is just one of the most elegant metrics, and I always, I always liked it, but I, I never fully understood the mechanics of it until, Dave and I went down this path. and, essentially, Liveliness looks at all of the coin day destruction, or the Bitcoin days destroyed, all time, and divides it by the all" }, { "speaker": "is_on", "time": "10:44", "start": 643.94, "text": "One way to think about this, every coin is accumulating coin days until it is spent, and once it's spent, it destroys everything it's accumulated and resets back to one. If you look at the entire market, what percentage of all of the coin day creation has been flushed out of the market? And, and you can think of it, how active is the supply? If no coin has ever transacted ever on the whole network, then your liveliness is going to be zero, because you've never had any coin day destruction. If on the other hand, every single coin was spent, you're gonna have Hundred percent liveliness, because it's everything's gonna be spent and it starts, accumulating again. so that was kind of the, the next big, iterations at twenty eighteen period. Dave Pugh, who was the, the other author from Ark Invest, for Cointime Economics, himself and Marad came up with the, MVRV ratio, and, really it's kind of been exploring this data ever since, but that was kind of the first big wave of," }, { "speaker": "stephan", "time": "11:40", "start": 699.89, "text": "of The, you know, the, I guess let's talk a little bit about the corollary then. So the idea being if an old coin moves, that there's more impact. Okay, actually, one sec, let me just explain this just for, you know, we wanna make it, make it accessible for people. So for people who aren't familiar with how Bitcoin works, there's this concept known as a UTXO, unspent transaction output. Every time we spend something in Bitcoin, there are inputs and outputs to that transaction, and the inputs are totally, you know, consumed in that transaction New outputs. And so what this is getting at is this idea of, hey, if we look at when these coins move, that can give us some indicator about things. And so, y-- in your report, you spell out, there's kind of the UTXO tracking model, and then there's the CoinTime system. So, do you wanna just spell out some of the differences there?" }, { "speaker": "is_on", "time": "12:32", "start": 752.18, "text": "Yeah, absolutely. So, so it all, you're right, it all comes back to the UTXO. And UTXOs are created at some point, and at that point of creation, A timestamp and we assign a, a price stamp, right? So now that UTXO has a piece of information about when it was acquired and how long it's been held for, right? How long it's been unspent. when it's spent, we can then measure the delta between those two things, right? It was acquired at ten thousand dollars in September two thousand and nineteen, and it was spent at, sixty-nine thousand in November two thousand and twenty-one. So you can start measuring those deltas between the two. Now, the, the UTXO model and, Analysis does is it looks at all of the UTXOs in the system and it aggregates, it looks at how much profit was locked in, how much loss, how much, how many coin days were destroyed, how much volume is moving, you know, right, volume to and from exchanges. These are the types of metrics that we typically look at, and some of the challenges with it, and advantages is you need a data science team to actually fully understand this is Binance, this is what Binance's wallets look like, this is how they manage them, therefore we know that coin went in or Now if we think about it from the perspective of lost coins, right? Satoshi's coins, we believe that they're lost, and we've gone, and gone, these are the Satoshi coins, and they're pretty unlikely to move, but they could still move, right? We don't actually know that they're lost. There's always a probability band around these things. But you essentially have to get into the weeds and calculate and look at, and make assumptions about each UTXO, looking at different patterns of spending, and then assigning a probability that these are lost, exchange, whatever the, the cohort you Now, what the CoinTime Economics framework does, all it does is take the time, the holding time component, and it really tries to simplify this whole thing down and say, \"Well, how much of the supply has been spent and how much of it hasn't been spent?\" And the concept here is we're not trying to solve an actual supply region. What we're trying to do is just say, \"How much of the network is alive and kinetic and how much of it is long dormant and call it kind of the potential energy, it could be spent, but it hasn't.\" hasn't been spent. That's kind of, and we just bifurcate the supply. Lightning is kind of the centerpiece of this whole thing, but, really what I was looking for, I mean, and here's a great way to, to kind of conceptualize this, newly mined supply, is it really fair to dilute lost coins? Because lost coins can't really respond to market dynamics or new issuance, they're, they're kind of not really affected because they can no longer move. and on the other hand, active investors who are actually moving their coins around and Last six months, they're probably more likely to experience the dilution effects of newly mined supply and market dynamics and volatility. so what we do is we look at all the economic models that we've got and we apply it, we kind of amplify the, the magnitude on, on the active investor and put less of an emphasis on the lost coins, less of an emphasis on coins that simply don't and will not respond, to any of these economic impacts. so it really comes down to that bifurcation, liveliness, vaultedness, active supply Vaulted supply. Just breaking it up into which region is gonna experience these effects and which ones probably aren't." }, { "speaker": "stephan", "time": "15:49", "start": 949.13, "text": "Okay. And one other question I'm sure people will have is, there will be times where maybe some of the heuristics go wrong. So as an example, I may do a self-transfer, or I may, let's say, I have, you know, I previously held all my stuff on a single-signature cold card, and now I wanna go to multi-signature, and I'm actually spending, so in your system that will look like, \"Oh, Stephan is spending his coins Actually, I'm just transferring, I'm upgrading my security into a multisig setup. How do you account for that, or do you just kind of, you know, kind of hand wave that away, or how do you kind of deal with that aspect?" }, { "speaker": "is_on", "time": "16:24", "start": 983.52, "text": "No, that's, that's a great question, and this actually comes up quite often. And the answer is it actually doesn't matter, because what we're doing, particularly in a coin time economics framework, by you moving your coins, right? So, so let's think about it from the lost, go to the Lost your keys the moment that you receive it, the market's not gonna know, only you know it's lost. The market will not know it's lost until maybe ten years later. Ten years later, we're gonna go, \"This thing really hasn't moved in a long time.\" The probability that it's lost goes up and up and up and up and up. by you spending and moving it to a new multisig or a new wallet, what you're actually informing our economic, co-time economics under that framework, what you're saying is that it's not lost, right? And the fact It means that you are now in a position where if the market went to a million dollars, there is a probability that that supply will come back online, right? It isn't lost, it's still active. So, so there's a couple of things from the UTXO standpoint, yeah, there's always gonna be those error bars that kind of falls under what I was saying before that, you know, you withdraw it plus or minus five percent of your buy price, but some other guy got it at minus plus buy price, right? So over the average, you kinda get a pretty good idea" }, { "speaker": "is_on", "time": "17:42", "start": 1061.51, "text": "You know, moving your wallet to a, from a single to multi-sig, it happens once, and in the grand scheme of the million coins that transact every day, it's probably a small volume. So these error bars just kind of get absorbed into the mix. But from a coin time economics perspective, all we're trying to do is say, hey, those coins aren't lost, full stop. and it-- again, it gets smoothed out across the whole network, but because they're active, they are the most-- they are the ones that are gonna be economically impacted by," }, { "speaker": "stephan", "time": "18:12", "start": 1091.53, "text": "And so another area is, I guess, some of these metrics have been built, and I guess there's a little-- there's an element of trying to understand the psychology of the, the users, because I've seen some of the reports that, you know, particularly in your reports and other reports, they sort of make some assumptions, which I think are fair. It could be that the experienced hodlers sort of know more than the, the noobs per se. Why, why? Why is there, you know, can-- Do you want to explain a little bit of your thinking on that?" }, { "speaker": "is_on", "time": "18:45", "start": 1124.97, "text": "Absolutely, no. This is, this is a fascinating story, and, often it'll come back to the long and the short term holder cohorts, which we developed at Glassnode, and the concept behind this is actually, it's based in statistics, it's rooted in-- And, and people ask, \"Why is the threshold a hundred and fifty-five days?\" there's been other analysts who've run the same study on their own node, and they've found" }, { "speaker": "is_on", "time": "19:12", "start": 1151.55, "text": "That kind of realm. And basically what happens is once a coin has been dormant for that long, the probability that it gets spent, it collapses well and truly below one percent per day, and it continues to decay. so if it's younger than that, basically most of the volume, in fact, I looked the other day, something like sixty percent of the volume on any day was transacted within the last hour. So it's the same coins churning away in exchanges and all that kind of fun stuff. those long-term holder coins are those that have passed that threshold Where their probability, it's all about probability, of spending on any day is actually very small. So that's the first frame of reference. the second question is, how do we apply these assumptions of them being hodlers or speculators or whatever else? and the answer is, this is, again, it's kind of based on how they behave. a great example, we've got a report, in fact, we've got two reports which are really interesting on this. The first one's called, \"Buying High and Selling Low,\" this is the" }, { "speaker": "is_on", "time": "20:11", "start": 1211.49, "text": "They buy their coins at the top en masse, and then they hold them the whole way through the bear market, and I'm sure many of your audience will, will be listening to this, being like, \"Oh, that was me. I went through this journey. You hold them all the way to the bottom, and then you capitulate, right? And it turns out that you sold the exact bottom, you bought high and you sold low.\" we see this play out time and time again. But what we see is that each cycle, more of these people don't do that. More" }, { "speaker": "is_on", "time": "20:42", "start": 1241.51, "text": "If you look at things like supply older than one year or long-term holder supply, any of these metrics, they really start to fall off as we break the previous all-time high. So basically, the hodlers are willing to step in, buy the dip, and just wait, and they wait, and they wait, and then as soon as we get to the all-time high, the spending ramps up, and it just keeps going and keeps going until the bull market basically caps out. and it's, it's one of those things, it's kind of empirical. We just continue to see these patterns But, for now, it seems to be a fairly robust heuristic that, it, you know, and will evolve as it goes." }, { "speaker": "stephan", "time": "21:17", "start": 1277.23, "text": "Yeah, and I think the other element of it is the, in your report, you spell out that in many cases these are long-time hodlers and that they are, you know, they could, you could say they're, quote-unquote, taking profits, because they, they are, you know, at, at maybe that's for that person, maybe they've hit a certain number, right? This number now allows them, you know, Family or buy a car, whatever, and that's the level that they, they've chosen to, you know, do that. And so, I guess one other area which I, I think this is my understanding of it, but you, people might be thinking, well, what if they don't sell on an exchange? What if they're doing it all peer-to-peer? But I guess the answer really is that it doesn't really matter because just, just looking at the time that coin moved and what was the market price at that time, because as much as we wanna say, and" }, { "speaker": "stephan", "time": "22:12", "start": 1331.51, "text": "Most of people are still operating in a world where you still have to pay your rent or your mortgage, denominate it in fiat terms. And so one bitcoin equals one bitcoin is true, but at the same time, the price still matters, right?" }, { "speaker": "is_on", "time": "22:23", "start": 1342.74, "text": "Exactly. And, and there's a lot of people who, 'cause we did a bunch of reports down when FTX had imploded, and what we were saying is, there was all of the indicators that it was a capitulation event. we got like, minus two standard deviation flush out of all those losses" }, { "speaker": "is_on", "time": "22:41", "start": 1361.49, "text": "Tax loss harvesting, to which I say, \"Well, do people tax loss harvest in a bull? They generally tax loss harvest at the end of a bear, right? Yes, there's some seasonality to it, but like these are beh- it's all about behavior. People make these decisions to tax loss harvest when they're down, right? So at the same guy that one guy's capitulating out, another guy is tax loss harvesting, but they all happen around the same period of time. but yeah, you're absolutely right, it all kind of blends together, and there's You just look at the whole market, right? You look at how much profit or loss the entire market's in. in my experience, you can get within plus or minus seventy percent of reality, when you do something like that. The next level is you can say, okay, show me those profit and loss, but for long-term holders or for short-term holders. Now show it to me to exchanges, and we can break this down. It's kind of like a multi-dimensional cross-section of the supply. How much of the sup- like the hot wallets. Hot wallets is a How old it is, right? How long since it's last moved. We have those, but for the spending dynamics, when people are spending, what is the distribution of age? we can do it by shrimp, whale, crabs, right? Different sized entities. You can do all these different cross sections on the unspent component, on the spent component. I mean, in theory, you could do it on the mempool. There's all sorts of really cool stuff you can do to just take slice and dice, cross sections of the market and see what different cohorts are doing. Some of them But if you come at it from that perspective, there's a, there's a whole lot of edge in there." }, { "speaker": "stephan", "time": "24:15", "start": 1455.45, "text": "Back to the show in a moment. The lead sponsor of this show is Swann dot com, and Swann is organizing Pacific Bitcoin Festival. It's coming up October 5th and 6th in LA at the Barker Hangar. This is a can't miss event. This will be such an amazing time to connect with all kinds of bitcoiners. There are top notch speakers coming like Max Keiser and Stacey Herbert, Vijay Boyapati, Preston Pish, Greg Foss And so many more. I'll be there, and I'm looking forward to seeing you there. If you are in America or near America, this is going to be an amazing event. Last year the feedback was phenomenal. There was a wide range of people from all kinds of different interests in the Bitcoin world coming to talk about Bitcoin. There'll be talks, panels, fireside chats, there'll be activities, there'll be a swan dome with deep dive sessions for advanced topics and deeper discussions, as well as just a great chance to connect with like-minded people. This is a great opportunity to bring Your friends and family along also, so make sure you check the dates in your diary, in your calendar, look up flights, hotels, October 5th and 6th in LA at the Barker Hangar. Get your tickets at pacificbitcoin dot com, use code livera for a discount there, and I'm looking forward to seeing you there. Bitcoin is growing beyond just a single layer, it's a fully fledged multi-layer ecosystem, and Mempool dot space is the way you can track that and keep an eye on things. I use Mempool dot space every time I send a Bitcoin on-chain transaction, I can use that to target the fee in terms of low, medium, or high, as well as keep an eye on things like how many unch-unconfirmed transactions there are. I can also use the Lightning Network Explorer when I'm looking for a new Lightning node that I wanna open a channel with, so it's a really useful tool that shows All kinds of things, whether that's the mempool, the blockchain, second layer networks, and the team is just continually innovating and putting up new measures and metrics and things that you can track. For example, in mempool v3, they've got the block template algorithm re-implemented. You can keep an eye on full rbf equals zero or full rbf equals one. You can see mempool blocks are scrollable and keep an eye out for the mempool accelerator integration which is coming. You can get all of this over at mempool dot space. And now back to the show. Yeah, I see. And I guess one other angle with the, different categories, right? As you said, shrimp and whale and whatever. I think whale is typically over one thousand coins, right? And what, what are some of the key numbers there? So like, is it shrimp is less than one Bitcoin or what's the--" }, { "speaker": "is_on", "time": "26:42", "start": 1602.43, "text": "Yeah, yeah, that's a general system. I mean, it's all kind of a little bit arbitrary, and probably to be honest, there's probably a, a work to be done in terms of like not just doing" }, { "speaker": "is_on", "time": "26:52", "start": 1612.5, "text": "one, ten, a hundred, you In terms of dollar value, right? You know, ten thousand dollars is kind of a small holding. and actually, there's another good point there, which is when we look-- talk about Shrimp, right? If you do privacy best practices, here's actually a, a good one that some of the more technical in the audience will, I get this question a lot, and that is, I'm a dollar cost avenger, and let's just say for, for whatever reason, I'm buying point one Bitcoin per month," }, { "speaker": "is_on", "time": "27:20", "start": 1639.66, "text": "right? I'm more of a sat BTCOS and my wallet keeps generating a new address and I keep them all, you know, privacy best practice. There's no way for us to know that that's actually, right? You do that for twelve months, you've got one point two Bitcoin, but you're not gonna fall into the one Bitcoin plus category because you've got, you look like twelve individuals. And you'll often see when I'm doing my analysis, I will just say, \"Look, just show me all the coins under, under ten,\" because if you do under ten BTC, I'm just gonna look at the retail sized dollar Really care if you dollar cost average point one or one point two, doesn't really matter. You fall into this bucket of people who are regularly dollar cost averaging, and that kind of amorphous blob of, of people have a very, very particular behavior pattern. And, that's the way I, I often try to, try to frame it up. People overthink it, they, they, they go into the, the, the weeds and they say, \"Oh, but hang on a second, I'm withdrawing on a Thursday,\" and it's like, it doesn't really matter" }, { "speaker": "is_on", "time": "28:26", "start": 1705.76, "text": "shrinking, and if they're growing or shrinking, what does that tell you about their sentiment, their behavior, their patterns?" }, { "speaker": "stephan", "time": "28:32", "start": 1712.08, "text": "And it's also important to point out that the coins already exist, and they are just-- Yes. What we're really looking at is the transfers of those coins, because, you know, as we speak today, it's nineteen point something million coins. Of course, everyone knows, you know, twenty-one million is the final, you know, just a little bit under twenty-one million is the final number in like twenty-one forty or whatever, but it's really about how And I guess what we would expect to see is it distributes out more and more over time in terms of the number of people who hold some Bitcoin. But of course, there'll still be some whales and large entities and high net worth people and, you know, that kind of, those entities out there, right?" }, { "speaker": "is_on", "time": "29:12", "start": 1751.89, "text": "We did do a, a report that was called the, the Shrimp Supply Sink, and, what we really demonstrated with that, and I, I love it because it's one of those reports that we can, every time a report is like, \"Hey, look" }, { "speaker": "is_on", "time": "29:26", "start": 1765.78, "text": "That's an exchange, right? And we, we actually map out and say, \"Here's your exchanges, here's the ETFs and the custodial components, here's your number of Shrimps and how many coins they own.\" And, the reason it was called the Shrimp Supply Sync is 'cause what we've seen, and the, it, I think it's my favorite chart at the moment, and not a lot of people are talking about it, it basically looks at the thirty-day change of the Shrimp, right? Everyone under one BTC. In fact, The last time they had an extraordinary explosion where they just like they bought and they increased their balance significantly was the twenty seventeen high at twenty thousand dollars, right? Market's ripping higher and highest spike, it didn't revisit that level until FTX blew up. So if you think about that, we got down to twenty, twenty thousand dollars again, except coming from the other direction. So that chart is actually showing you Bitcoin education in action. It's showing there over a five year period, enough people can't-- the smart- The money we were talking about before, enough people learnt that Bitcoin makes so much damn sense that the narrative when FTX blew up is it's over for ten years, and yet these crazy psychopaths were stepping in and buying the dip at the fastest rate they've ever seen, and they've maintained that level. I posted a couple of charts a few weeks back talking about it's, it's, it's well and truly more than the daily issuance. so essentially every coin that miners put into the market, the Shrimps are buying one point four of them, right? So Shows what five years worth of education does." }, { "speaker": "stephan", "time": "30:57", "start": 1856.99, "text": "Yeah, that's a great, I think that's a great statistic to, keep in mind that over time, as you're growing the base of stackers and hodlers, that new mining supply is just irrelevant over time because there's just more-- There's just so many more stackers that it makes that number not really matter. so broadly then, as you were, you know, we've been touching on sort of the cycles of Bitcoin, and as you said, there are- Certain indicators about bear markets and bull markets, right? So as you said, in the bear market, that there's this, you know, there's a lot of this tax-loss harvesting, there's kind of a lot of transacting at that bottom, but then also that dynamic that as you are in the bull cycle, then some of the smart money is slowly taking some off the table per se, right? That they are maybe spending some coins at that point, and so then what do you typically find towards the- Late stages of the bull cycle, how, how, what does that look like on chain?" }, { "speaker": "is_on", "time": "31:55", "start": 1914.67, "text": "Absolutely, no, this is, this is a fantastic question, and it's actually something I've been working quite a bit on at the moment. you'll often hear me talk about what I call a top-heavy market. So, if anyone who's kind of familiar with, with, technical analysis, you've probably seen the volume profile. It's kind of like a bar, bar chart on the side of your, your price that shows you where the coins were Now, when you go through this bull market, what invariably happens is a very, very large amount of people buy the top, right? For whatever reason, they just buy the top. It's just what humans beings do. We love seeing it on the media and the news. Everyone feels comfortable when everybody else is buying. So at the exact same time that those people are buying, well, for every buyer, there's a seller, and as you mentioned before, it's usually the smart money who starts selling those coins. So what eventually happens is that sell side, at some point, right? No bull market will go forever, at some point it reaches a zenith and there's a lot of coins up the top that have been acquired at very high, expensive prices by relatively inexperienced buyers, right? People who are buying when the media is all the rage, right? And their taxi driver tells them to buy it, and they actually go and do it. And for most people listening to this, myself included, you've probably been there, right? You've probably been and done this. exact same thing where you bought the top. Now what happens when a bear market just kicks in? All those coins that were previously in profit suddenly find themselves not in profit. Price falls below and generally in what we call the shot across the bow, a really, really sharp sell-off, and it just scares people because suddenly they've seen a huge portion of their wealth go well and truly under their cost basis and then they start to panic. Now what also happens around this time, at least it's happened in twenty seventeen and again in, twenty twenty-one Is transaction counts fall off a cliff, active addresses fall off a cliff, volumes, really, really fall down. So you see that the network is, fees collapse, so all this kind of on-chain activity stuff really falls off a cliff, lots of supply suddenly falls into a loss. mVrv, which is one, we've got a great report called, Mastering mVrv, it shows you how much profit is still in the system, it collapses. So basically there's a lot of coin volume that is now well and truly underwater. And what happens is those people become sellers, because over time the smart money realizes, okay, this isn't good, it's probably over. they start selling on the rallies higher, taking whatever exit liquidity is left, and you kind of end up into this bear market structure. So it's kind of that inversion where at the peak, it is the most bullish, the most exciting, everything is going higher, and the problem is that's actually people taking profits, right? Profits go up, coin day destruction goes up, volume is mooning, all of these things Those are great until they're not, and it's usually a very, very quick reversal." }, { "speaker": "stephan", "time": "34:51", "start": 2090.51, "text": "Interesting. And so one other area I'm curious to ask about is some of these, known large numbers of coins, right? Now you touched on this as well, so there's this, entity known as Pethoshi, right? And that's rumored to be Satoshi's one million coins or approximately, there, and in your report you also spell out that, you know, probable lost coins is about one and a half million. you say there's the Gox trust- The Mount Gox trustee from, you know, twenty thirteen or fourteen or whatever, with like sixty-four thousand coins. So those, I guess, some of the large known entities, that you sort of discount in some way, right?" }, { "speaker": "is_on", "time": "35:28", "start": 2128.5, "text": "Yeah. So, so what we do in CoinTime Economics, this is in, in the last section, it's really a bit of an illustration, and in many ways, Chapter eight is kind of like next steps, right? Where else can we take this concept, and just kind of put some, some initial ideas out there? And we do Literally, their coins never moved. They moved fifty Bitcoin to hell, and that was the end of it. So in a way, because for, for every kind of grouping of coins, how much of their supply or their coin days have been destroyed and how much has been stored, right? How much of that time is still in there? Well, for Satoshi, it's pretty much entirely. It's just all coin day storage, right? As in, his liveliness is" }, { "speaker": "stephan", "time": "36:08", "start": 2167.62, "text": "zero, right? Correct." }, { "speaker": "is_on", "time": "36:09", "start": 2168.82, "text": "Liveliness is effectively zero. Yeah. you've then got these kind of in 1.4 million, they haven't been spent since the first traded price of Bitcoin back in 2010. So if we think about for years, like the, the market's gone through plenty of cycles, there's been plenty of opportunities, they still haven't spent them after, you know, 14 years, it's pr- they're probably lost. and obviously our confidence, right? We know the Satoshi's haven't moved, but these might be lost, but we don't really know. Mount Gox, there's kind of another big grouping. I and again, they were all from various hacks and the like, which is, kind of shows you that Bitcoin, s-some of these, these pools that, the hackers got were just extraordinary volumes. and then we go all the way to the far end of an entity that had a liveliness of pretty much one, and that was actually an entity called RenBTC. Some of you probably heard about it. It's basically one of these wrapping things to get Bitcoin onto Ethereum, but they had a very bizarre wallet behavior. Basically, every time someone deposited or withdrew," }, { "speaker": "is_on", "time": "37:17", "start": 2236.53, "text": "If you deposit the whole, it was like thirty-five thousand Bitcoin at one time, would churn, it would spend and, and absorb that new deposit, or when you withdrew, it would spend and you would peel off that one coin. So what was going on there is that almost every like five, six blocks, the entire thirty-six K was just spent, spent, spent, and at one point they accounted for something like sixty percent of transaction volume, which is like, it's wild. But it, it kind of shows you we can use this coin time economics framework to- To actually map out and say, well, in the Mount Gox case, they have a liveliness, I can't remember what it is, I think it's like point two or something, but when they get distributed, it's gonna go to one. So you can start looking at liveliness per entity. We could see Binance's liveliness, you could also see long term, short term liveliness. You can use this metric to say, of this group, how much of their coin, coin block accumulation do they spend or accumulate? And, you know, we, we don't know where that" }, { "speaker": "stephan", "time": "38:17", "start": 2296.87, "text": "One other area I'm curious, and I, I believe I actually asked a similar question to Rafael when I had him on the show, from Glassnode, but do things like Lightning undermine your model? Because I could transact with you on Lightning, and that doesn't necessarily hit the chain. Now, to be fair, there will still be occasional, let's say, rebalances or maybe spliced transactions where, let's say, we resize our channel, but that might- Change the way we look and try to understand what's happening on chain, but I mean, I, I also appreciate that today Lightning is relatively small in the broad scheme of things. But how do you see that, like, if Lightning were to become a lot bigger as a fraction of, you know, Bitcoin users, let's say, would that undermine some of these on-chain metrics?" }, { "speaker": "is_on", "time": "39:04", "start": 2344.22, "text": "Yeah, that's, that's a great question, a-and the answer is that, no, not really, because, as with all economies, like, Bitcoin is like, it's at the ground level It's essentially almost entirely on chain. there's question mark, I mean, there's a couple of different angles there. For Lightning Network, we could in theory look at supply in Lightning, supply not in Lightning, and you could essentially just remove, if, if Lightning, if we expect that it's gonna just stay there, locked in there, we develop metrics, we run Lightning nodes, and you actually analyze the Lightning Network, it's just like a new economic framework, and we start analyzing how we study that particular network, and then all of the coins that are moving Your cohort is Lightning, coins, coins, locked up in Lightning network. the same, similar argument can exist for exchanges. People say, \"But a lot of the trading activity doesn't happen on exchanges.\" It's like, \"Well, sometimes you get thirty, forty, fifty percent of spot volume flowing in and out, right? If you glue in and out together, deposits and withdrawals, it's, it's a huge volume. So even, I mean, a lot of people, when you send your coins to an exchange, most of the time it's to do Whatever it is, there's an economic decision that you're baking in there and in the aggregate. So this kind of balance of on and off chain, at the end of the day, gBTC, if we know that gBTC, right? We know all their addresses, you can just exclude them and you can say, \"That is entity A, we're gonna look at everything minus entity A.\" And, you know, a good example is our long and our short term holders. Long and short term holder supply excludes exchanges. So if you do long term plus short term plus exchanges, you" }, { "speaker": "is_on", "time": "40:42", "start": 2442.44, "text": "That you want, and at the end of the day, it comes down to the skill of the analyst, in knowing what is economically meaningful and what isn't." }, { "speaker": "stephan", "time": "40:49", "start": 2448.79, "text": "Right. And so, I guess it, it just means you also have to understand the technology to understand what's happening underlying, right? So a quick example could be with Taproot, lightning channels coming over time, it may look like lightning channels don't actually look like a lightning channel on chain, like they just look like a standard single signature spend. And so that could start to, you know, change the way you look at these he Change the way that we analyze things that are happening. a great example of this that" }, { "speaker": "is_on", "time": "41:17", "start": 2476.57, "text": "happened recently is, is, is actually Ordinals, because with Ordinals, suddenly all of our like, 'cause, 'cause they're moving around like ten thousand sats, right? Yeah. So tran- the average transaction volume collapsed, and we had metrics that we'd initially designed without thinking about Ordinals, you know, not assuming people'd be sending around ten thousand sats, but transaction counts like almost doubled, they mooned to a new all-time high, and suddenly like, \" Then you look at the volume and there's none of it. So you, you kinda have to look at these things in context, and in that instance, if I care about the monetary use case of Bitcoin, then I'm gonna look at volumes, right? Active addresses, in fact, active addresses fell because most of the wallets for Ordinals reuse addresses. So your active addresses fell, transaction volumes fell, mean that volumes fell, but transaction counts went through the roof. So again, it's, it's, it's a dynamic economy, it's gonna continue to become more dynamic" }, { "speaker": "stephan", "time": "42:12", "start": 2532.24, "text": "Which I learned about recently is that if you look at the UTXO count, maybe before this ordinals cra-- ordinals and inscriptions craze, it was something around eighty-five million UTXOs, right? The unique count of UTXOs, that's the UTXO set. But nowadays, it's more like, it's over a hundred and ten, a hundred and fifteen million, last I checked. But part of that is being driven by these ordinals people because as part of them storing their ordinal, they end up creating more UTXOs because they wanna store their, in their, In their model, they're, they're storing their ordinal in a UTXO, and in order to kind of keep them separate, they've had to create more UTXOs. So that, that again, is another contextual shift that had to happen just to understand what's actually going on, on the, on, you know, out there when the rubber meets the road." }, { "speaker": "is_on", "time": "43:00", "start": 2580.38, "text": "And I think a better way to think about this, there's no question that on-chain analysis is a suitable term for it, but it's also Bitcoin economics, right? We're literally looking at the economics of the Bitcoin system, Well, it's going to have increasingly diverse and interesting ways that it moves. you know, what we're trying to discover is what matters, which metrics actually describe the true behavior, how do we filter this stuff out, how do we clean it, how do we parse it, and ultimately, how do we turn it into actionable information?" }, { "speaker": "stephan", "time": "43:28", "start": 2608.15, "text": "Yeah. One other area that I noticed in your report was around inflation rates adjusted by CoinTime, right? So, I guess the context, most people are thinking Bitcoin, obviously, twenty-one million is the final, you know, just a bit under twenty-one million And people have been calculating based on the block subsidy what the inflation rate theoretically is. Now, I noticed in your report, you're actually trying to say, \"Well, we're adjusting that based on coin time.\" So can you explain what, what does it mean to adjust Bitcoin's inflation rate based on coin time?" }, { "speaker": "is_on", "time": "43:58", "start": 2638.41, "text": "Yeah, absolutely. so the concept here is that what we call a nominal inflation rate, right? What most people would calculate, \"I've got nine hundred coins per day, times three hundred and sixty-five days to annualize it, divided by circulating supply. There you go, there If you take the inverse of that, you'll get your stop to flow ratio, right, which everyone's familiar with. But in reality, we've got those two supply regions I mentioned before, active supply and vaulted supply. And what those essentially represent is active supply is the economically meaningful. When you were talking before about your single sig to multisig, you've essentially proven to the network that these aren't lost, they're economically mobile, they are held by someone who's going to experience the dilutive effects, however small or large, of new issuance. Right? So the active supply is essentially the best way to think about it, they are coins that are most likely to respond in the event of anything, market volatility, a sell-off, a rally, whatever it is, inflation, all sorts of economic impacts. The vaulted supply is essentially the lost, the huddled, the real deep cold storage, stuff that Bitcoin could go to five dollars and they're probably not gonna move, right? These are coins that just simply aren't moving anywhere because they either can't move or the investor, the, the, the holder is, is pretty hardcore So if you put it into those two categories, does new issuance really dilute the lost coins? Not really. It's going to be more impactful for people who are responsive and active. So CoinTime, adjustment essentially applies a weighting factor based on the amount of, li-- based on liveliness, it applies that weighting factor and amplifies the impacts of inflation on that active component and nullifies it or discounts it versus the vaulted supply. And another way to think about this, it's basically a grading curve saying how much of the Bitcoin network is probable to respond. Now, here's a really interesting, just co-- because we do have some case studies using that to say, \"Well, does this actually work from our experience?\" Well, if we look at it from the stock to flow ratio, right? Let's invert that whole thing. a higher value means that it's essentially a scarcer asset. Now, back in the Satoshi era, stock to flow was very, very small because you've got fifty Bitcoin coming into a world of You know, a hundred thousand Bitcoin. So it's really meaningful, right? It's a huge amount of supply coming in. But what happens if that supply was never spent? So yeah, it was mined, but it was never, it never entered the economy. It's been vaulted ever since. So as a result, yes, there's lots of coins coming in, but you can't get them because unless you're mining them or buying off someone who's willing to sell them, it's really hard to get them. So the scarcity in the early years was actually massively underestimated, and if you look" }, { "speaker": "is_on", "time": "46:42", "start": 2802.08, "text": "at Right, from zero to fourteen hundred dollars in twenty thirteen, that coincided with a period where there was very, very-- there was a great deal of scarcity, people just simply weren't spending them into the economy. if you look at our modern era, and a really interesting anecdote is we actually saw, the, the August two thousand and seventeen, the Bitcoin Cash hard fork, lots of people with long dormant coins spent them, as you described before, to take advantage of the dividend. So that spending of old coins actually showed the world showed the network that there's a bunch of coins that we previously discounted as lost or long dormant that actually are now mobile. So from that perspective, we kind of have to reassess and reevaluate what is the true scarcity. and in that instance, we have slightly diminishing returns, right, over, over recent years, and the inflation rate is actually larger than we would otherwise estimate. and the reason is because there's literally more supply trading, churning, moving around. There's a whole lot more dynamics going on than there wasn't in In the early years, it's the exact opposite." }, { "speaker": "stephan", "time": "47:45", "start": 2864.79, "text": "Back to the show in a moment. Are you looking to build with Bitcoin or do you want a job in Bitcoin? Having Bitcoin skills could really help you here. Base fifty eight is a Bitcoin protocol school by Lisa, and this is the place to get guidance in your Bitcoin developer education. Now, don't be concerned if you're a total beginner, they have classes that are available for beginners. So there are classes ranging all the way through from beginner all the way up to expert level classes. Now, there are online classes as well as in person intensive classes where You can speed your process of learning about Bitcoin development. So the Taproot intensive class is coming up, covering Taproot, Tap, Tapscript, Schnorr, Frost, and MuSig too. This class will be on just before TabConF and on again in Austin, Texas, 13th to 15th of November. Go to base58.info to get the information on signing up. CoinKite dot com are the creators of the Coldcard, my favorite Bitcoin hardware security device. It has two secure elements, it's got plenty of RAM and a CPU, it's a very reliable performer, it has NFC support, and it also has micro SD card, so you can put transactions in and out using a micro SD card rather than directly connecting with your computer. Though of course, if you're a beginner, you can just get a USB-C cable and directly plug it to your computer and use it like a standard hardware device. But of course, there are these different options Options available for you so that you can increase your security. Also, they've got different color devices, so for those of you who want your cold card in red or black or glow in the dark, they've got different colors available on the site, and they also have a range of accessories that you can use. So for example, you can get the block clock, which is a great clock that shows you things like the Bitcoin price or the block height, and all other statistics are available there, and you can also get the seed plate, which is a metal seed backup product for your hardware wallet. Seed. So go and get all this over at coinkite dot com, use code livera for a discount. And now back to the show. Yeah, that's a counterintuitive point, because, yeah, because most people are just looking at the, let's say, let's call it the naive inflation, which is just the, the amount implied by the block subsidy, as opposed to the amount actually freely trading or actively trading in this, context. And" }, { "speaker": "is_on", "time": "49:57", "start": 2997.01, "text": "the interesting thing about this, right, is that what we're doing essentially is we're using coin block destruction, coin- Day destruction as a demand parameter, and we actually list in the report that we believe that coin block destruction or coin day destruction is one of the most important economic primitives of Bitcoin, because it is the demand side. And the great thing about this is, yes, we have a stock to flow rate, a coin time adjusted stock to flow ratio, but we can't predict what it's gonna be in the future, because we don't know what that coin block destruction looks like. And in my view, as an engineer, what I never liked about the traditional stock to flow and any models based off it, future, and we, we, we don't, right? We know Bitcoin's issuance curve, we have no idea how the market's gonna respond to it. whereas the CoinTime adjusted stock to flow, it actually has a demand parameter baked in because of that, coin block destruction that's baked into it." }, { "speaker": "stephan", "time": "50:47", "start": 3047.25, "text": "Okay, yeah. So to give another example, I'm just thinking of a question there. So you might have seen, and I'm sure, I think Glassnode has this statistic as well, but people talk about this idea of, \"Oh, look, there's all these coins" }, { "speaker": "stephan", "time": "51:04", "start": 3063.54, "text": "I guess I've got two main, I guess, points or questions I'm curious to hear your view. In one element, you could say, \"Well, it could, it might be moving off an exchange, but into another custodian, right?\" That's one aspect. and secondly, I think the other point to consider is that if the price were to shoot up, right? If the price tomorrow, you know, in a year or whatever, if it goes to two hundred thousand or three hundred thousand, there'll be a lot of hot-- there'll be a lot of those coins that" }, { "speaker": "is_on", "time": "51:33", "start": 3093.36, "text": "No, I think that's, that's actually the perfect way to frame it. So the first one is that, when people look at the exchange balances, what that doesn't include is custodians, it doesn't include things like GBTC, it doesn't include MicroStrategy, right? These large entities, which, you know, what we do there is we capture, these are the coins that are on the exchange, right? These are the ones that someone has deposited, they're holding on Binance or Coinbase or whatever, but they don't include coins that have, you know, So it's trying to capture that, that, that supply angle. And the second point you raise is, it's, it's just so important, and I wish more people understood this, if there is a price for every coin, right? Some of it is infinity, right? But some of it isn't, and at some point in time, my biggest argument is the stock of Bitcoin is orders of magnitude more important than the flow, because the stock of Bitcoin, other coins, it will come back into circulation, and that's what Cointime Economics tries to do, it tries to say how Locked away. Long term holder supply will oscillate with price. It'll go up and down, up and down, 'cause it's measuring actual coin volume that reaches a certain age. Coin time economics is saying, what's kind of that long slow equilibrium level of coins that are probably not going anywhere? It's much, much less responsive, it doesn't move up and down in the cycle, cyclic, cyclic patterns, it's much, much smoother, but it's telling you that like bedrock of hodling. so that, yeah, absolutely, coins will come back into the equation, All we're trying to do here is discount how much of the supply is likely to do that and how much isn't." }, { "speaker": "stephan", "time": "53:08", "start": 3187.8, "text": "Yeah. Okay. And so just to give people some high level numbers, are you able to share what is vaulted supply today, what's like active today, just to give some context here?" }, { "speaker": "is_on", "time": "53:18", "start": 3197.99, "text": "Yep. So circulating is what, nineteen point four four, million. In fact, my block, block, literally just changed away from circulating supply, that would be nice. active supply, sorry, vaulted supply from memory, it's about six point four six point four million, and then active is whatever that is subtracted off. now, vaulted supply has been fairly stable. Now, if you actually zoom in and look at it, it does oscillate around, but, relatively speaking, it's been somewhat stable between about, five and six and a half million. what we then do is we actually go down, there's a, there's a section in, in chapter eight where we do estimates of lost coins, and we try to just measure what is our upper bound, lower So let's go top to bottom. In fact, let's go bottom to top. coins that are very, very high confidence are lost. There's about one point four million of them. They're those zombie coins I mentioned before. They haven't been spent since July two thousand and ten, when the first price came out. you're either seriously hardcore or you lost your keys or you're potoshi. so that's kind of high confidence lower bound. We know there's more lost coins than that, but that's what we know about. if you go to the top end and you say, \"Well, all of the coin block storage, right, vaulted supply, if every coin--\" And here's a really cool stat, when we get to market cycle tops, twenty thirteen, twenty seventeen, twenty twenty-one, the peak of a bull market is the maximum incentive for somebody to sell, right? Because it's literally the highest the price has ever been and it's points that it comes down and it, it doesn't drop below that. So we drew a, a very simple curve fit through it and said, \"Well, let's assume that every coin that hasn't ever responded to any kind of bull market peak, let's just assume that's like an upper bound surface for lost coins. And that sits at around, I think it's like five point eight or six million Bitcoin. And then we do a couple of other models. We look at like coins older than seven years, we do some adjustments to our long and short term holder supply, and that's to get" }, { "speaker": "is_on", "time": "55:19", "start": 3319.25, "text": "our Somewhere between eighteen percent and about twenty-three and a half percent, of all Bitcoin is probably lost. So, at ballpark figures, that means there's probably at the end of the twenty-one million curve, there's probably about seventeen million that are not lost. that's kind of our, our, our best estimate, so that's like three or four million" }, { "speaker": "stephan", "time": "55:39", "start": 3339.44, "text": "coins, including the potash coins?" }, { "speaker": "is_on", "time": "55:42", "start": 3341.5, "text": "Including the potash coins." }, { "speaker": "stephan", "time": "55:43", "start": 3342.9, "text": "Yeah. Gotcha. Yeah. And that seems to be the number that's, you know, been floating around, kind of three or four mil time, people's security gets better, so there's less lost coins because now, you know, b-back in those days, Bitcoin didn't matter as much, right? Yes. or at least it wasn't valued as Highly, the security techniques weren't as good, the security knowledge wasn't as good, whereas today, you would argue it is better, so there'll probably be less lost coins over in the future, but we're sort of looking back and-- And what you're describing" }, { "speaker": "is_on", "time": "56:17", "start": 3376.88, "text": "right there is exactly why vaulted supply. Essentially, 2017, that 2017 bull market is when the world realized, \"Oh, shit, Bitcoin's actually worth something,\" right? And wallet hardware developed, people stopped losing it, it had value. and we've seen that vaulted Gone sideways ever since, and the reason is 'cause all the newly mined issuance is going into active supply, because people don't want-- like, they're not losing them anymore, right? They're, by and large, they're remaining mobile and active, and that's fine, right? That's just part of the Bitcoin economy." }, { "speaker": "stephan", "time": "56:48", "start": 3407.61, "text": "Interesting to see, yeah. So it's like this whole, you're sort of piercing the veil or you're sort of looking beyond what's really going on. so I guess looking at where we are today, I guess where, if you were to, you know, if, if you didn't know the price today and you were just looking at, you know, on-chain, your on-chain metrics, what would you think is happening in Bitcoin? Would you say, \"Hey, we're kind of coming out of a bear market now,\" if you didn't know the price and just looking" }, { "speaker": "is_on", "time": "57:17", "start": 3437.21, "text": "Is when we go back and, at the, the Bitcoin Live conference in, in Australia, my, my presentation was on the textbook Bitcoin bottom, and this was like FTX, and in many ways, actually, the bottom that happened in Ju-- it started forming in June when three arrows blew up. all the signals started to really look like just every single, every single previous Bitcoin, bear market floor. FTX was a little bit of a hyperextension, but it was just kind of the nail in the coffin, and it had In fact, I think I was on, on NVK's podcast as price was selling down to the final wick, and they're like, \"Is this it? Is this the bottom?\" And I was like, \"Look, don't hold me to it, but it could be.\" anyway, it turns out that was the low. But textbook, absolutely textbook bottom. what we then see, we've got a couple of different metrics and tools that we use for this, but what do you want to see when a bull market starts to kick back in?" }, { "speaker": "is_on", "time": "58:14", "start": 3494.07, "text": "Well, We're in the, the hangover phase, right? This is the, the twenty sixteen grind, the twenty nineteen grind. We've had an uptick, it's no longer bottom formation, but it's also not raging bull yet, right? We're still in this very-- it, it's a crab, it is crab market one o one. now, coming back to a, a coin time framework, a lot of people look at the realized price, and I think this is actually of all the innovations that we came out of it with coin time economics, this is probably" }, { "speaker": "is_on", "time": "58:48", "start": 3527.77, "text": "Is that there is in fact a pricing model which is smack in the middle. It has a long term mean and median of pretty much one, and it's been stable there for a very long time. So the realized price is the, the, it's the realized cap divided by circulating supply, which is basically the on-chain market cap, value every coin at the price when it transacted, and then divided by the circulating. Now the problem with that is the circulating supply-- when Satoshi's coins never contributed, they never had a price, so they're not in the numerator, really, they're worth zero, but we do put them in the deno-- in the denominator. So the problem with using the realized price as the cost basis of the market is to get a break-even Given level of one, Satoshi's thirty-six billion dollars of profit has to be offsetting some guy with thirty-six billion of losses. So what's happening is all the lost coins have so much profit, but we're masking the damage in the bear market. So what Cointime Economics does is we actually filter out all of those lost coins and we only look at the economically active component. And what we find is we believe the real cost basis is, you'll never believe it, thirty-two thousand dollars. Pretty much ex- Exactly what we're currently contesting, trying to get above. So in many ways, half the market is still underwater on their position, and this is this psychological level that it's, it's always been there, right? the same reason that the two hundred day moving average, it still worked back in like twenty thirteen, before we even had trading view, right, with the Bitcoin prices. the two hundred day moving average still worked because human beings respond to these like gut feel, gut checks, right? How, how high has it gone since I've been looking at the price? There's Things that like human beings respond to these, these kind of incentives. So anyway, I think probably the most interesting dynamic is that this price level is pretty much just above us, and to my view, we've got a, a crab market until we get above that level, and once we get above that level, you've kinda completed the bear market sentence, because this thing is smack in the middle of the market. We spend fifty percent of our time above, fifty percent below." }, { "speaker": "stephan", "time": "01:00:51", "start": 3651.6, "text": "Right, yeah, that's fascinating. And so, yeah, can give, people some insight there by zooming out and Does it look like, because obviously there's our subjective feel for these things, and, you know, there are-- there'll be people who are out there saying, \"No, this,\" you know, I mean, in the bull cycle, people are saying stuff like, you know, \"Supercycle,\" and, \"The Final Cycle,\" and stuff like this. I was against that. I thought, you know, where it's human nature, we're just gonna have this kind of herd mentality, and for what it's worth, we're probably gonna have a few more of these cycles" }, { "speaker": "stephan", "time": "01:01:28", "start": 3688.34, "text": "Saying on social media, sometimes you can get this impression, or maybe that's an engagement thing, people are just saying stuff because, you know, it gets, you know, the kind of overconfident, bullish stuff gets engagement. yep. A-and-and the way to think" }, { "speaker": "is_on", "time": "01:01:39", "start": 3699.87, "text": "about it, right? There's a middle to, to everything. Mean reversion, it's, it's something these analysts use all the time. There is some point, there is some magnitude of profit that the market just starts taking it and eventually oversaturates demand. And likewise, there is some" }, { "speaker": "is_on", "time": "01:01:58", "start": 3718.3, "text": "For whatever reason, we seem to, as a herd, we seem to do this at the exact same time, at the exact same amplitude, cycle after cycle every time. and it's because the market changes, right? Inflation rates change, Jay Powell's mood changes, all this stuff changes, but the human ape brain is still, you know, multi-thousand-year-old hardware that just keeps doing the same thing." }, { "speaker": "stephan", "time": "01:02:19", "start": 3739.02, "text": "Well, it all comes back to that, Absolutely. Well, look, I think, been a great chat. I think there's a lot of interesting In a slightly different way, understanding liveliness, understanding vaulted supply versus active supply. So, yeah, if you've got any, I guess, any final takeaway, like if there was one thing people took away, what should they take away from, this discussion?" }, { "speaker": "is_on", "time": "01:02:43", "start": 3763.79, "text": "I think that the, the Bitcoin economy is one of a kind. There is nothing like it. it is a living organism, and essentially all of the on-chain data is yours, mine, every Bitcoin you've ever met, it's all of our collective decisions imprinted on the ledger forever. And essentially we're looking for economic information in what does that tell us about Bitcoin's health, what does it tell us about sentiment, about investor conviction, all of these things. It's a fascinating study, and at the end of the day, it's all about proof of work. If you sit down and you just, you, you try to actually understand what's going on, it doesn't have to be complex, but, you know, if you do a bit of proof of work and understand what's going on with this, this data, I" }, { "speaker": "stephan", "time": "01:03:23", "start": 3803.16, "text": "mean, for the And where can people find the report?" }, { "speaker": "is_on", "time": "01:03:30", "start": 3810.12, "text": "Absolutely, so you'll find me at, at underscore checkmated on, on Twitter. I can't call it x, I just don't get it. But, the Cointime Economics report you'll find on our website, it's my pinned post, and, do check out our Insights portal, it's, insights dot glassnode, where we've basically got all of our weekly reports, and, we also have a YouTube channel which is basically linked to" }, { "speaker": "stephan", "time": "01:03:51", "start": 3831.15, "text": "that," }, { "speaker": "stephan", "time": "01:03:55", "start": 3835.36, "text": "The show notes are available at stephanlivera.com. Thanks for listening, and I'll see you in the citadels." } ] }