Cointime Price: BTC Magical Pricing Methodology (I)

Cointime Price is a pricing model designed for the unique UTXO structure of BTC.

Written by: Mr. Beg

TLDR

• The Cointime Price series of articles will be divided into three parts, this is the first part.

• This article will introduce the basic principles and bottom-fishing applications of Cointime Price.

• Cointime Price is a brand new and efficient pricing method for BTC.

• More strict compared to Realized Price, more sensitive compared to LTH-RP

Cointime Price Basic Introduction

The concept of Cointime Price originated from 2023/08/23 in "Cointime Economics", a collaboration between Ark Invest and Glassnode.

The calculation logic of Cointime Price itself is relatively complex, and this article will try to explain it in a simple and understandable way.

Cointime Price is a pricing model designed for the unique UTXO structure of BTC. In this article, I intend to skip the complex calculation process and directly introduce the principles to everyone.

In simple terms, since BTC itself is a blockchain, there will always be a verification process for both block production and transaction transfers.

Cointime Price differs from traditional on-chain pricing methods by adopting a "time-weighted" approach:

As shown in the figure above, the green line is the Cointime Price, and the calculation formula is shown in the image, which involves three concepts:

• Coin Blocks Created（CBC）

In the n-th block, CBC = the circulating supply of BTC at that time.

• Coin Blocks Destroyed（CBD）

When the corresponding amount of BTC exhibits a transfer behavior, it is determined to be destroyed.

Multiply the amount of BTC transferred by the duration these BTC have been held (how many block times have passed before the transfer),

You can obtain CBD, which can be interpreted as 'the time-weighted amount of BTC'.

• Coin Blocks Stored（CBS）

CBS = CBC total - CBD total, which can be understood as "unspent BTC time-weighted quantity"

In the above figure, the numerator of the formula is the sum of each CBD generated during each transfer multiplied by the corresponding quantity.

Based on the above, three characteristics of Cointime Price can be derived:

1. Due to the time-weighted design, when long-term holders transfer (distribute) in large quantities, the rate of change of the Cointime Price will increase.
2. Because trading involves buying and selling, from the buyer's perspective, the numerator in the formula can also be viewed as the "total cost weighted by time" in the current market; dividing this value by CBS will yield the "average cost of chips in circulation weighted by time".
3. Because CBD considers transfer behavior, no transfer means no CBD will be generated, thus effectively eliminating the impact of chips lost in ancient times.

Comparison with LTH-RP

In a previous article, I introduced LTH-RP. In simple terms, LTH-RP is the average cost of BTC purchased by long-term holders.

Since Glassnode's definition of LTH is "holding time > 155 days", a relatively rough definition can only be given for "long-term";

Cointime Price directly considers "how long the chips were held at the time of the transfer behavior," thus making its performance more precise and sensitive compared to LTH-RP.

As shown in the figure above: every time the main upward wave arrives, Cointime Price can always react one step ahead of LTH-RP, and it can more immediately indicate the emergence of distribution behavior.

Therefore, in my analysis, I actually prefer to use Cointime Price to analyze the market.

Bottom Fishing Application

As mentioned earlier, Cointime Price is a fair pricing method for BTC based on time-weighted averaging.

In that case, once the market price falls below the Cointime Price, it means that the market price is already lower than the true value of BTC, which is usually a good time to buy the dip.

As shown in the figure below: I have marked the time points when the historical BTC price was below the Cointime Price, and we can see that these correspond to good entry opportunities.

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