New Framework for Analyzing Bitcoin Network’s Economic State
On-chain analysts at Glassnode and Ark have developed a new framework called “Cointime Economics (CE)” for analyzing the Bitcoin network’s economic state. CE aims to increase the accuracy of on-chain analysis, which is commonly used by savvy investors and traders to predict Bitcoin’s price movement.
What is Cointime Economics?
- CE moves away from analysis based on Bitcoin’s unspent transaction outputs (UTXOs) and instead introduces a new unit of time measurement called “Coinblocks.”
- Coinblocks are created every time a new Bitcoin block is added to the network and are destroyed when Bitcoin UTXOs are spent.
- CE breaks down Bitcoin’s supply into two components: “Active” and “Vaulted” (inactive) supply.
- These components serve as reference points for economic calculations such as inflation rates and stock-to-flow ratios.
Advantages of Cointime Economics
- CE amplifies the economic impacts of truly active supply while reducing the impact of long vaulted supply, which likely includes lost coins.
- Previous metrics, such as realized price, have been influenced by Satoshi’s long-lost Bitcoin stash, leading to inaccurate measurements.
- CE allows analysts to account for lost coins using simple mathematics, without the need to identify which coins are lost.
Hot Take
Cointime Economics (CE) provides a more accurate framework for analyzing the Bitcoin network’s economic state. By introducing Coinblocks and considering active and vaulted supply, CE improves the calculation of important metrics like inflation rates. This new approach reduces the impact of lost coins and provides a clearer picture of the network’s true economic activity. With CE, on-chain analysts can make more informed predictions about Bitcoin’s price movement, benefiting crypto investors and traders.
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