On-chain Data Academy (7): A trap of a brand new, ARK participated research on BTC's magical pricing methodology (II)

This article is the 7th in the On-Chain Data Academy series of 10 articles. Take you step by step to understand on-chain data analysis, welcome interested readers to follow this series of articles. (Synopsis: On-Chain Data Academy (6): A new set of exciting pricing methodologies for BTC with ARK participation (I) (Background supplement: On-chain Data Academy (I): Do you know what the average cost of BTC in the whole market is? This is the second in the TLDR Cointime Price series that will be divided into three, and it is highly recommended to read the previous article in this series first! This article will introduce one of the top-escaping application methodologies of Cointime Price Personal model sharing: Cointime Price deviation model Cointime Price Simple Review Cointime Price is a concept proposed in Cointime Economics, which evaluates the fair price of BTC through the design of "time weighting", which is more flexible and sensitive than simple LTH and TH. At the same time, under this design framework, it can also effectively exclude the influence of lost chips in ancient times. If you are new to Cointime Price, it is highly recommended to read the previous article first! Cointime Price Deviation Model Cointime Price Deviation is one of the models I personally designed when studying on-chain data, and the following will explain how this model is designed and how we will use this model to make escape judgments. Quantify the deviation between the current price and the Cointime Price Since Cointime Price is highly representative of the true holding cost of BTC chips, more precisely, the holding cost of "long-term holders" (because the longer the holding time, the greater the impact on Cointime Price). Therefore, when the current price deviates too much from the Cointime Price, it will theoretically increase the incentive for long-term holders to take profits and distribute chips. I design the formula for the deviation rate (distribution ratio) as follows: Deviation rate = (current price – Cointime Price) / current price As shown in the figure, we can get the status of the distribution ratio (purple line). As you can see, whenever the distribution ratio is at a high level, it is the corresponding top position. If this is the case, what is a "high position"? Individuals here will define high positions statistically, as detailed below. Second, the definition of extreme values of Cointime Price Deviation You can look at the above chart again, and you will find that the high level of Deviation is not easy to define. The Deviation peak corresponding to the top of each bull market shows signs of a slight decline, so it is obviously not rigorous to define the high with a fixed number. To solve it, I adopted the concept of "standard deviation" in statistics: Calculate the mean and standard deviation of historical deviation values Define "mean + n standard deviations" as "high place", hereinafter referred to as Threshold and then smooth the average of the deviation value When the average value of Deviation is > Threshold, the top signal is displayed As shown in the figure above, such a graph can be obtained after the above processing. Here are two additional points: The "n" in the above "mean + n standard deviations" is an adjustable parameter, and the larger the n, the stricter the conditions for the signal to appear The main purpose of the above "moving average smoothing processing" is to filter noise After marking the part of the purple line in Figure 2 beyond the orange line on the price chart, you can get the signal as shown in the above figure. Conclusion The above is all the content of the on-chain data academy (seven), and there will be a detailed teaching for Cointime Price in the future, readers who are interested in learning on-chain data analysis in more depth, remember to follow this series of articles! If you want to see more on-chain data analysis and teaching content, please follow my Twitter (X) account! Hope this article helps you, thanks for reading. Related reports On-Chain Data Academy (II): How much does it cost for Hodlers who always make money? On-chain data academy (3): Have the makers at the bottom made profits? On-Chain Data Academy (4): Visual BTC Chip Price Distribution Map [On-Chain Data Academy (7): A New BTC Magic Pricing Methodology (II) with ARK Participation This article was first published in BlockTempo's "Dynamic Trends - The Most Influential Blockchain News Media".