Unspent Transaction Outputs Age
Overview
Many of the first generation blockchains (such as Bitcoin and Litecoin) use unspent transaction outputs (UTXOs) to account for users’ funds. Whenever a transaction is made a new UTXO is created, indicating the input (where the funds came from) and the output (where funds are being transferred to). The UTXO Age indicator measures the volume of transactions being created and classifies these by time frames. By doing so, the UTXO Age Indicator segments the number of tokens (eg. the number of BTC in the case of Bitcoin) according to the time it has been since they last moved from one address to another. For example, in the case of Bitcoin, we see that 4.12 million BTC have not moved in more than 5 years.
💡 How can I use it?
The UTXO Age indicator is helpful to grasp the volume of transaction activity occurring relative to the blockchain’s historical transactions. An increase in short-term unspent transaction outputs denotes a high amount of transaction volume taking place. This could point to either many addresses fearing to miss out (as was the case in late 2017) or to high volumes coming from large investors (as seen in December 2018).
The UTXO Age metric is helpful to understand long-term market cycles. When short-term UTXOs (marked in red to yellow waves) are increasing it points to more new money entering the market relative to previous volume activity. This generally coincides with late-stage bull markets.
On the other hand, a sharp decrease in short-term UTXOs points to bear markets as can be seen in early 2018. This is a result of short-term traders leaving the market and less new money coming in relative to historical volumes.
⭐️ Quick Tip: Use the UTXO Age indicator to estimate where in the long-term cycle Bitcoin and other UTXO-based cryptocurrencies are currently at. If short-term UTXOs (red and yellow) are spiking for a significant period this points to a late bull market, potential bubble phase as money entering surpasses relative long-term volumes.
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