Decred On-Chain Mini Pub 1: Relative MVRV Ratio

A Comparative Look at Decred and Bitcoin’s Realized Caps

Relevant Reading

Rationale

For those unfamiliar with the Realized Cap, please read the linked piece above as Checkmate did a rockstar job in formalizing the power behind the Realized Cap, how Bitcoin’s differs from Decred’s, and how this manifests itself in price action for each respective coin. For those more comfortable with the abbreviated version, a summary of relevant points surrounding the Realized Cap are included below:

With the above in mind, the tools presented within aim to establish the following:

On-Chain Toolkit

Relevant tools for analysis with their respective calculations are included below:

On-Chain DCRBTC Price: Compares the cost basis of each chain, and provides a network vs network “opportunity cost” value

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Relative MVRV Ratio: Compares the premium / discount of Market Price vs Realized Price across coins

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Relative MVRV Price: The DCRBTC price at which the MVRV Ratios between Bitcoin and Decred are equal (DCR MVRV / BTC MVRV = 1)

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Relative Mid-Point: The mid-point between (1) On-Chain DCRBTC Price and (2) Relative MVRV Price

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Relative MVRV Average: The 142 day (number of days it takes for an unvoted DCR ticket to expire) average of the Relative MVRV Ratio

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Why Do These Tools Matter?

Spending within the cryptocurrency space is one of the most deliberate financial acts somebody can commit to. This naturally emerges as a function of the fact that transactions cannot be reversed once they’ve been included in a block that gets onto the consensus chain — the slightest mistake doesn’t have any recourse / means to recover. At a psychological level, this is a significant line in the sand: when coins move, the owner has decided that the risk of a mistake in coin movement is worth it for the potential reward (i.e. the reason the owner is moving the coins).

In Bitcoin, HODLers coins do not move frequently — giving us less frequent updates on their psychological outlook. On the Decred chain, we receive this signal for intent incredibly frequently, with HODLers coins moving around in the ticket system.

By comparing Realized Caps and MVRV Ratios we are exploring relative psychology between networks, and where periods of relative fear / euphoria are likely kicking in for stakeholders by analyzing the market traded price versus its on-chain values.

Charts + Analysis

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Combined Relative Price and Relative MVRV Charts
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Relative Value Prices Zoomed-In
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Relative MVRV Zoomed-In
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Final Point

Bitcoin and Decred have high signal, yet different behaving Realized Caps as a function of their respective blockchain mechanics. The goal of this piece was to help highlight some of these differences, and how it plays out on the price charts.

In particular, Decred’s Realized Cap is one of a kind — the amount of valuable data it provides surrounding stakeholders is second to none. I likely have one more piece on this in the pipeline, and look forward to checking back on my findings.

Until then — signing out.

PBN

Code

Github Article Copy

Crypto + Accounting

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