Ark Invest and Glassnode Introduce “Cointime Economics” Framework to Decode Bitcoin’s Economy Amid Bear Market
- Ark Invest and Glassnode introduce a new framework, “Cointime Economics,” to understand Bitcoin’s economy during the bear market.
- The framework assesses Bitcoin’s economic weight based on the last time it was moved and introduces metrics like “coinblock,” “liveliness,” and “vaultedness.”
Amid the ongoing bear market, investment firm Ark Invest and blockchain security company Glassnode have collaborated to introduce an innovative conceptual framework named “Cointime Economics.” This pioneering framework aims to provide a comprehensive toolkit for grasping the intricate economic dynamics of Bitcoin in a novel manner.
Unveiled through a whitepaper titled “Cointime Economics: A New Framework For Bitcoin On-chain Analysis,” the approach reflects a joint effort by David Puell, a research associate at ARK Invest, and James Check, the lead analyst at Glassnode. The framework revolves around distinguishing between the existing unspent transaction (UTXO) model and a novel approach termed “cointime.” This new model seeks to gauge the “real economic weight of a Bitcoin.”
Central to the “Cointime Economics” framework is the concept of assessing a Bitcoin’s importance based on the duration since its last movement. A critical component is introduced – the notion of a “coinblock.” This concept multiplies the number of Bitcoins by the blocks produced while the Bitcoin remains inactive. To illustrate, if 10 coins are held during the production of 10 blocks, the result is 100 coinblocks.
The whitepaper highlights a crucial insight: significant coinblock destruction signifies that long-term holders are divesting their Bitcoins. These experienced “smart money” investors tend to hold larger Bitcoin balances, execute trades from lower cost bases, and generate higher profits.
Innovative Metrics and Consistent Analysis
The framework introduces two novel metrics to analyze Bitcoin’s economic status. “Liveliness” gauges network activity, indicating the frequency of coin movements or destruction. “Vaultedness” measures the number of coins stored, reflecting protocol inactivity. The authors assert that the cointime framework provides a systematic, mathematical approach to measuring each Bitcoin’s economic importance over time.
As opposed to the UTXO framework, which marks a coin as “moved” once it leaves its coinbase address, the cointime model factors in the duration of a coin’s static state, magnifying the impact of older coins on Bitcoin’s economic activity.
This advancement by Ark Invest and Glassnode exemplifies the cryptocurrency industry’s commitment to developing new tools for a deeper understanding of blockchain dynamics. The “Cointime Economics” framework has the potential to offer valuable insights into Bitcoin’s behavior during market fluctuations, fostering more informed investment decisions and contributing to the evolving landscape of digital finance.
