In an intriguing revelation by investment company Ark Invest and security firm Glassnode, a new theoretical approach to understanding the Bitcoin economy was presented last Thursday. The approach, detailed in a whitepaper dubbed “Cointime Economics: A New Framework For Bitcoin On-chain Analysis”, is geared towards shedding light on Bitcoin’s changing economic status.
The whitepaper’s authors, research associate David Puell and head analyst James Check, counterpose Bitcoin’s prevailing economic measurement technique – the Unspent Transaction Output model (UTXO)- with a new model they call “cointime”. This innovative system of measurement seeks to portray the true economic worth of a Bitcoin based on its dormancy period since its last move.
In the new cointime technique, a multiplier called a “coinblock” is used. The coin number is multiplied by the block output whilst the Bitcoin lies inactive. Case in point: if there are 10 untouched coins over a 10-block-production span, it corresponds to 100 coinblocks.
Notably, the method intimates that a high rate of coinblock decimation implies that long-standing holders are parting with their Bitcoin holdings. There’s a nod towards the noteworthy experience and trade capabilities of these “smart money” investors.
The whitepaper also unveils two novel metrics for scrutinizing Bitcoin’s economic trends: “liveliness”, gauging network’s activity scale through coin movement frequency; and “vaultedness”, referring to the quantum of stored coins, indicating the network’s inactiveness.
However, despite the novel cointime approach, Bitcoin faces quite a hurdle en route to its next bull run. A primary stumbling block is its macroeconomic predicament; amid elevating interest rates, investors incline towards risk-free assets with dependable yields, overshadowing Bitcoin’s innate worth and cash flow generation potential.
Adding to Bitcoin’s difficulties is the necessity to substantiate its use beyond a mere investment tool. Although touted as a groundbreaking technology, the asset is primarily hoarded for hopeful price leaps rather than active application.
Nevertheless, there does exist a silver lining for Bitcoin, as optimists foresee a favorable turning point in its upcoming halvening event in April 2024. This significant milestone event, characterized by reduced rewards for Bitcoin miners, has in the past set the stage for market upturns.
Source: Cryptonews
