On-Chain Data: A Framework to Evaluate Bitcoin
Bitcoin is unique relative to traditional asset classes, meaning that it is unable to fit within the framework associated with them, and this has prevented investors from understanding it as well as adopting it. In an attempt to address this, ARK analyst Yassine Elmandjra recently co-authored a white paper with prominent crypto on-chain analyst, and ARK consultant David Puell that provides a simple approach on how to analyze public blockchains entitled ‘On-Chain Data: A Framework to Evaluate Bitcoin’. David and Yassine use the framework to discuss on-chain data, its importance, how we get to our metrics using it, and to give some context around the work we have done to develop it. We begin with a definition of on-chain data, then dive into the three-tiered framework, and along the way, point to some of the insights it is possible to gain from cryptographically verified access to such data on the blockchain. Tune in for all this and more, today!
Key Points From This Episode:
- What on-chain data is and how it analyzes the inner economics of Bitcoin.
- The nature of on-chain data and why it is easy to extract it from Bitcoin.
- How Bitcoin’s transparency is one of its value propositions as it pertains to the ability to analyze it.
- The framework developed to provide a basis to analyze public blockchain networks.
- The three-layer pyramid of the framework: Network health, cost basis, and the third layer that combines them.
- An explanation of the concept of ‘realized capitalization’.
- How the transfer of the asset itself is a proxy for a buy and sell that determines cost basis.
- What it means if the realized cap is greater than the market cap.
- How significant it is that bitcoin provides a cryptographically verified cost basis.
- The fact that on-chain data is on-demand and not subject to human error.
- An explanation of the short to long-term realized value ratio developed by ARK.
- What it means that over 50% of Bitcoin supply hasn’t been moved in two years.
- Weighting the 1-day and 6-12-month HODL waves by realized cap.
- What the on-chain data says about where we are relative to this market cycle.
- David’s take on the process of developing active management relevant signals.