Understanding the Bitcoin Economy: A New Framework for Analysis

Understanding the Bitcoin Economy: A New Framework

Investment firm Ark Invest and blockchain security firm Glassnode have collaborated on a whitepaper titled “Cointime Economics: A New Framework For Bitcoin On-chain Analysis.” The paper introduces a new model called “cointime” that assesses the economic weight of a Bitcoin based on the last time it was moved. It also introduces the concept of a “coinblock” to measure the economic activity of Bitcoin. The whitepaper suggests that heavy coinblock destruction indicates long-term holders selling their Bitcoin.

Main Breakdown:

The whitepaper introduces the cointime economics approach for understanding the economic realities of Bitcoin.
The cointime framework considers the importance of a Bitcoin based on the last time it was moved.
The concept of a “coinblock” is introduced to measure economic activity.
The paper suggests that heavy coinblock destruction indicates long-term holders selling their Bitcoin.
New metrics, “liveliness” and “vaultedness,” are introduced to analyze Bitcoin’s economic state.

Bitcoin faces obstacles before its next bull run. Its macroeconomic predicament and lack of intrinsic value make it less attractive compared to risk-free assets. Additionally, Bitcoin needs to prove its use case beyond being an investment vehicle. However, the upcoming halvening event in April 2024, which reduces rewards for miners, has historically preceded market rallies.

Hot Take:

The cointime framework provides a new perspective on understanding the economic importance of Bitcoin. By considering the last time a Bitcoin was moved and introducing coinblocks, this framework offers a mathematical approach to analyzing Bitcoin’s economic activity. However, Bitcoin still needs to overcome macroeconomic challenges and prove its utility beyond being a speculative asset.