Overview
In on-chain analysis, we can separate the notion of nominal value, and realized value when assessing transfer volumes. During periods of high volatility such as late stage bull / bear markets, it is common to observe periods of elevated realized value, as investors take profits at tops, or capitulate at lows.
The Realized Value RVT is an oscillator which is designed capture the relative magnitude between Realized Value, and Nominal Value Transferred. This variant is specifically focused on the Bitcoin Long-Term Holder cohort)
Nominal Volume is a measure of the raw BTC or USD value transferred. Here we consider Change-Adjusted volume.
Realized Volume is a measure of the difference between the disposal, and acquisition price of a coin (also change-adjusted).
The Realized Value RVT is calculated as the ratio between aggregate Realized Value, and aggregate Nominal Value. In other words, Realized RVT compares the economic payload (Realized), to the total value transferred (Nominal).
Realized Value RVT = ((Realized Profit + Realized Loss) / Transfer Volume) * (LTH Supply / 21e6)
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Interpretation Guide
Higher Values indicate periods where net change in realized value is large relative to the aggregate nominal transfer volume. During bullish periods this indicates a large degree of profit taking is occurring, and increases the probability of oversupply. In a bear market, it can signify a capitulation event has taken place, whereby large realized losses were locked in relative to the total transfer volume.
Lower Values indicate periods where the net change in realized value is small relative to the aggregate nominal transfer volume. This typically occurs when the majority of coins on the move, are being transacted at a very similar pricestamp to their original acquisition price (break-even), and thus realizing little net change in value. This is typical of late stage bear markets and early bull markets, where HODLing behaviour is at its peak, and most on-chain volume is sourced from the set of already highly active supply.
The oscillator and barcode chart at the bottom provide additional information to gauge the dominant market trend.
🟢 Where the LTH Realized P/L Ratio > 0.9 it indicates that Realized Profits exceed Realized Losses by a wide margin, which is typical of more constructive market trends.
đź”´ Where the LTH Realized P/L Ratio < 0.5 it indicates that Realized Losses exceed Realized Profits, which is typical of bearish market trends.
Coined by
Checkmate, inspired by work on the Sell-side Risk Ratio by Mikołaj Zakrzowski.