Introducing Investor Cost Basis On-Chain

@Sakura please summarize this article, thanks uwu.

TLDR

The article introduces a new on-chain metric called the Cost Basis Distribution (CBD) that provides a detailed view of Bitcoin’s investor cost basis over time, enabling deeper insights into market dynamics and investor behavior.

Key Points :key:

  • CBD tracks the average cost basis per address, offering a more accurate representation of individual investor behavior compared to previous metrics.
  • CBD uses a heatmap to visualize how the cost basis distribution evolves over time, revealing critical price levels that act as accumulation or distribution zones.
  • CBD provides insights that complement traditional technical analysis, as it identifies actual on-chain accumulation patterns rather than just relying on price and volume.
  • Derivative metrics like Spent Supply Distribution Quantiles and Median Realized Price/MVRV further enhance the analysis of supply dynamics.

In-depth Summary

The article introduces the Cost Basis Distribution (CBD), a novel on-chain metric that builds upon the previously introduced UTXO Realized Price Distribution (URPD). While URPD provided a snapshot of the current cost basis distribution, CBD adds a time component and an address-based approach to offer a more comprehensive understanding of how investor cost bases shift over time.

The CBD heatmap visualizes the total Bitcoin supply held by addresses with an average cost basis within specific price buckets, allowing investors to track the evolution of accumulation and distribution zones. This data-driven framework provides valuable insights that complement traditional technical analysis, as it identifies actual on-chain behavior rather than relying solely on price and volume.

The article highlights several use cases for CBD, such as observing accumulation during market corrections and distribution during rallies, which can help investors refine their entry and exit strategies. Additionally, the article introduces derivative metrics like Spent Supply Distribution Quantiles and Median Realized Price/MVRV, which further enhance the analysis of supply dynamics.

ELI5

The article talks about a new way to look at how much Bitcoin people have bought and at what prices. This new thing is called the Cost Basis Distribution (CBD). It shows a picture of where all the Bitcoin is held, based on the average price that people bought it at. This helps us understand how people are feeling about Bitcoin and where they might be buying or selling it.

Writer’s Main Point

The main point of the article is to introduce the Cost Basis Distribution (CBD) metric, which provides a more detailed and dynamic view of Bitcoin’s investor cost basis compared to previous on-chain analytics tools. CBD empowers investors with a data-driven framework for understanding market trends, managing risk, and making informed decisions.

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