RHODL Ratio

Every coin carries the date it last moved between wallets and the price it was worth on that date. Grouping coins by how long ago they last moved, then adding up what each group was worth at the time, splits the network's value into age bands. Those bands are called realized value HODL waves, and this indicator is built from two of them.

One band holds coins that moved in the past week, which is the newest money. The other holds coins that last moved one to two years ago, which is money that arrived earlier in the cycle and has stayed put. The ratio between them describes who currently owns the value.

The result is multiplied by the age of the market in days. Coins are lost permanently over time and the surviving supply skews older, which would otherwise drag the ratio down as the years pass; the multiplier offsets that so readings from different eras can be compared.

A rising ratio means value is concentrating in coins that just moved. That happens when earlier owners hand their coins to new buyers, which is what a market changing hands quickly looks like. The further the newest band pulls ahead of the seasoned one, the more the turnover is concentrated in money that has just arrived.

A falling ratio means the opposite: the value sits with owners who have held through a year or more without moving anything.

The target zones marked above the chart are fitted to where the ratio has sat at past cycle extremes, and are recalculated each time a cycle turns. Because the ratio spans several orders of magnitude, it is read on a log scale, where each step up is a multiple rather than an addition.

High readings have clustered around the late stage of past bull markets, when the newest buyers held an unusually large share of the network's value. At Bitcoin's earliest major cycle peaks the ratio ran into the tens of thousands, in one case topping out within days of the actual price peak.

The scale of those readings has not held up. Each cycle's high has come in far below the last, by close to an order of magnitude across the span so far, and the more recent highs have arrived well before the market's own top rather than beside it.

The low side has been steadier, and in absolute terms it has barely moved: the ratio has fallen back near the bottom of its range around most major cycle lows, when almost nothing was moving and the value belonged to owners who had held for a year or more.

The upper end is the weak spot. Each cycle's peak reading has come in lower than the last, and by a wide margin, so a level taken from the early cycles describes what they did rather than anything the ratio is due to reach again. The high-risk target is recalculated against that decay as each cycle turns, which keeps it in reach, but it is being fitted to a handful of cycles and inherits the thinness of that sample.

It inherits everything the age bands get wrong. A coin moving between wallets belonging to the same owner resets its age as though it changed hands, and Bitcoin moving into and out of exchange or fund custody does the same, so some of what registers as new money is not.

The market-age multiplier is a correction rather than a measurement. It assumes coins are lost at a steady rate, which nobody can verify, so the adjustment it applies is an estimate.

The two bands are a choice, not a natural boundary. One week and one to two years were selected because they separated past cycles cleanly, and an indicator tuned on history can describe it better than it describes what comes next.