The Daily Dive #111 - Liveliness And Realized Losses

Liveliness Trends Towards Accumulation 

Today, we’re revisiting a useful on-chain metric, Liveliness, that tracks the accumulation and distribution behavior of HODLers. As a refresher, Liveliness is calculated as a ratio: the sum of all Coin Days Destroyed and the sum of all coin days ever created. 

• Liveliness increases as long-term holders distribute more coins, creating more coin days destroyed relative to coin days created.

• Liveliness decreases as long-term holders accumulate more coins, creating less coin days destroyed relative to coin days created. 

Throughout bitcoin’s history, we see clear patterns of long-term holder distribution and accumulation that drive bull and bear market cycles that can be easily tracked with Liveliness. 

Over the last year, we saw a rising Liveliness metric with long-term holders distributing more coins during the previous all-time high price rise from January through May. After that came a strong period of accumulation during lower prices, up until October where some long-term holder distribution started to take shape. Over the last couple weeks with price potentially reaching a bottom after the recent deleveraging event, the Liveliness trend looks to have started a shift back towards a period of slight accumulation. 

This would be a good sign to see long-term holders accumulate at these lower prices before another period of distribution. Accelerated long-term holder distribution at the current bitcoin price would signal a lack of confidence from the “smart money” that bitcoin has more upside over the next few months. 

Another way to view the Liveliness trend is to look at Binary Liveliness. Binary Liveliness is designed to help identify periods of accumulation and high distribution by older coins. The green value on the below chart will produce 1 when Liveliness is higher than its 30-day moving average. When it's below the average, it produces 0.

The blue line will return a 1 when Liveliness is higher today than the previous day or else it produces 0. A 30-day moving average is then applied to these results.

What the current data shows, looking at the blue line, is that Binary Liveliness is starting to trend and sustain lower values which signals Liveliness is in a potential new downtrend, or a period of more long-term holder accumulation.

Realized Losses Hit Over $3 Billion 

With the latest deleveraging event, the market realized over $1.13 billion in losses using a 7-day moving average. Over $3 billion in losses were realized in one day which is the highest realized loss event since May. When we also add in the profit realized on Saturday, December 4, the market, on net, realized $2.18 billion in losses. 

Sustained periods of the market in a net realized loss usually signal bear market trends playing out. What we would want to see over the next few weeks is the market bounce back to a realized net profit position and sustain there. The last period of the market consistently realizing losses on net was back in May through July, lasting over two months. 

But now with the market reset and the majority of on-chain data still signaling a neutral to bullish sign, this is likely a one-off loss-taking event that’s not a high concern.