2023-08-27 12:37:21
Analysts often encounter the problem that it is difficult to understand the price of BTC or the value of the Bitcoin network using traditional stock valuation methods. In response to this problem, among others, Glassnode and Ark Invest developed the new Bitcoin “Cointime” economic model. Fund management company Ark Invest and blockchain analysis company Glassnode jointly developed a new framework, which they called “Cointime”, and within the project, new analysis tools and thirty new metrics were created. The creators hope to use Cointime to develop more thorough valuation and pricing models. According to the Ark Invest whitepaper published on August 24, the new method offers new tools and concepts for modeling the dynamics of supply and demand. One of the system’s central metrics is the so-called “coinblock” (coinblock), which shows how many additional mined blocks a coin will remain inactive from the moment it is mined. The creators put it this way: “This approach allows us to divide the offer into active and inactive regions. These form the basis of new concepts.” Cointime Economics establishes a link between the fundamental unit of #Bitcoin time, the coinblock, and the dimension of coin supply. This approach allows for the bifurcation of the supply into Active and Vaulted regions. These form the bedrock of a new economic primitives. pic.twitter.com/dhN6WarOxi — glassnode (@glassnode) August 24, 2023 The framework also monitors newly created, destroyed, and stored coin blocks. The created coin block measures the total coin time of the network, the destroyed one shows the time-weighted traffic, while the stored coin block gives a more accurate picture of the inactive coins. With the help of three metrics, you can better understand how active the network is: Total bitcoin coin block generation, “burning” and storage since January 2010. Source: Ark Invest The Cointime framework can improve the accuracy of established valuation models such as MVRV (Market Value vs Realized Value) and introduces Asset Value vs. Also the Active Value to Investor Value (AVIV) ratio. In addition, it seems that with the help of Cointime, bitcoin inflation (meaning the number of new bitcoins mined by miners in a year) becomes better measurable, because inflation estimates may have been exaggerated in the past, while in the current circulation, the rate of inflation can be underestimated. Overall, it can be said that Cointime helps to understand the dynamics of bitcoin in a data-centric way, which Glassnode summarized as follows: With the help of this new approach, we can recalculate inflation rates, stock-to-flow ratio and transaction speed, which, in our opinion, will better reflect BTC demand. and supply balance. The white paper is authored by David Puell, researcher at Ark Invest, and James Check, senior analyst at Glassnode.
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