How “Viveliness” can follow the bullish and bearish cycles of the Bitcoin price

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The following is taken from a recent edition of Deep Dive, Bitcoin Magazine’s premium market newsletter. To be among the first to receive this and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Today, we revisit a useful on-chain metric, Liveliness, that tracks the accumulation and distribution behavior of HODLers. As a reminder, the liveliness is calculated in the form of a ratio: the sum of all the days of parts destroyed and the sum of all the days of parts never created.

Vividness increases as long-term holders dispense more coins, creating more coin days destroyed compared to coin days created. Vividness decreases as long-term holders accumulate more coins, creating fewer coin days destroyed compared to coin days created.

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

The liveliness of Bitcoin throughout history.

Over the past year, we’ve seen an increase in the liveliness metric, with long-term holders handing out more coins during the previous record price hike from January through May. There followed a strong period of accumulation during the fall in prices, until October when a certain distribution of long-term holders began to take shape. Over the past two weeks, with price potentially having bottomed out after the recent deleveraging event, the brisk trend appears to have started to return to a period of mild build-up.

Bitcoin Liveliness over a two-year period.

It would be a good sign to see long-term holders rack up at these lower prices before a further distribution period. An accelerated distribution from long-term holders to the current price of bitcoin would signal a lack of confidence on the part of “smart money” that bitcoin has more potential in the coming months.

Bitcoin Liveliness over a three month period.

Another way to see the trend in liveliness 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 chart below will produce 1 when the liveliness is above its 30-day moving average. When it is below average, it produces 0.

The blue line will return a 1 when liveliness is higher today than yesterday or 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 the binary liveliness is starting to trend and hold lower values, which indicates that the liveliness is in a potential new downtrend, or period. accumulation of holders in the longer term.

Binary liveliness indicates that we are entering a period of accumulation.

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