The below is from a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
In today’s Daily Dive, we’re highlighting the latest ARK Invest Bitcoin white paper, “On-Chain Data: A Framework To Evaluate Bitcoin.” The paper was authored by Yassine Elmandjra, analyst at ARK Invest and David Puell, on-chain analyst and market researcher. Both are leading analysts in the space with a history of exceptional work. We will summarize their recent white paper and provide some Deep Dive resources to supplement.
TLDR: The white paper’s aim is to help investors understand how to analyze and value bitcoin just like other traditional assets. The paper highlights Bitcoin’s real-time, global public ledger as a unique toolset and walks through some key on-chain metrics to understand.
Elmandjra and Puell start by breaking down on-chain data into three distinct layers across network health, buyer and seller behavior and asset valuation. Each layer is tailored to a different group of market participants.
The network health layer covers monetary integrity, security and usage of the Bitcoin network. Evaluating address supply distribution, supply in addresses holding fewer than 10 BTC has increased since 2013.
Transaction volume and velocity are ways to measure the health of the network. Transaction volume is approximately $53 million per day. Annual velocity reached a bottom in April 2021 which could be a result of investors diversifying into other cryptocurrency assets or because transaction activity is moving back on-chain.
For a deeper look into the total transaction volume of the network and the efficiency of the network, see The Daily Dive #108 - Bitcoin: The Most Efficient Value Settlement Network.