HODL Waves is Unchained Capital’s Bitcoin Blockchain Data Science Term
The accounting structure used in Bitcoin is called UTXO or unspent transaction output. The UTXO shows each Bitcoins age in terms of when it was last used in a transaction. The transaction history of every Bitcoin is stored in the blockchain and one can look back and do an analysis of the age distribution of UTXO over time. Bitcoin UTXO was recently analyzed by Unchained Capital a cryptocurrency based financial services lending company.
Unchained Capital came with a chart that shows how the age distribution of Bitcoins UTXO set historically from the first block of the digital currency. The chart enabled the capital experts to come up with the HODL wave that is a common pattern after a rally in the price of Bitcoin. This wave is created every time a large amount of Bitcoin transacts on the way up through a local price high and the price slowly ages into each other as the new owners of the Bitcoin HODL. The analysis discovered that when Bitcoin lost a large share, its value transactions reduced due to new investors and the new distinct holding periods.
The analysis done by unchained capital shows a pattern of holding emerge every couple of years. The analysis discovered three significant periods showing Bitcoin owners holding to their coins.
The Three HODL Waves
The first HODL Wave was between 2009 and 2011 when Bitcoin was worth $0 to $33. This first wave was not due to a price rally but it was caused by the lack of a significant value in Bitcoin. The owners held on to the digital coins as they were speculating that their value would rise with time.
The second wave was observed between June 2011 and December of 2013 when the Bitcoin price skyrocketed from $33 to $1k. After this hodling period, many Bitcoins (60%) were spent in the last one year and investors got good returns from their investment. The investors who sold their coins at the time were those who had purchased them prior to the two to three years before the peak and those who had bought through the $33 peak to the $198 peak.
The third wave was between 2013 and December 2017 that is the biggest yet. This is the period when Bitcoin’s price shot from $1k to $19k. During this period, close to 60% of the coins used, were older than one year. The unspent percentage of the coins during this period moved from 60% to 40%. Earlier investors were able to cash in and a new generation of hodlers was created. The reason for this effect is believed to be due to the Bitcoin cash hard fork and segregated witness soft fork, ICOs and countering gains.
In line with this analysis, it is only a matter of time before this latest hold wave breaks and creates a new generation of winners and new hodlers. A new wave is already forming and it shows that BTC fractions that are older than 12 months have dropped to 40%. This is in line with the analysis as after a great rally there comes a big HODL. A new generation of holders is already developing as per the analysis.
Who Is Unchained Capital?
Unchained capital is a financial service company that lends cash to long-term crypto holders who may want liquidity but do not want to sell their digital coins. The platform lends USD to persons and businesses who give Bitcoin as collateral. The team focus is on technological excellence, and it aims to build a financial product that can be used by crypto investors in the long term to get more value from their assets.
How Unchained Capital Works
The applicant of the loan only needs to complete an account and loan application on the unchained capital website. The turnaround time for the loan can be less than a day. The applicant will use their existing wallet to send collateral to the new loans vault address. Once this is done, the disbursement will be wired to the applicant’s bank account of choice.
The applicant will be expected to make monthly interest payments. In case the collateral value drops by 25%, the applicant will be expected to add more collateral or give a principal payment. In case the value of the collateral drops by 45%, the developers of the site have a right to repossess the collateral and sell it to recover the principal and any outstanding interest.
Once you have made your final payment that will include a principal payment, your collateral will be returned to an address of your choice. If you have sufficient collateral value, you get a chance to renew another loan that will have new terms and your principal payment will be deferred. A $10,000 loan with a repayment period of 2 years will cost you $2,500. You will be expected to pay $100 monthly interest payments and a single payment of $10,000 that will be due at maturity. The annual percentage rate of the loan will be 12.5%.
Why Unchained Capital
The company uses a unique per customer per loan multi-signature P2SH addresses for all the collaterals that are used in vaults. The platform uses hierarchical deterministic hardware wallets to store the private keys of the hardware devices. The platform also uses open source, well tested and industry standard software to author and audit the platform transactions.
The platform uses high-level security in their IT infrastructure in line with PCI-compliance standards. The network used is secure, and all the data is encrypted to en route to, from, and within the platforms environment. The platform requires two-factor authentication for users to access the sensitive data. The employees of the firm are uniquely identified within the platform by a centralized identity management infrastructure.
Every access to the system is controlled by the existing infrastructure and is minimal and limited. The system monitors all the traffic to, from, and within the environment.
Physical And Operational Security
The platform maintains an internal security policy and ensures that the personnel who are part of the platform adhere to the policy.
The platform hardware wallets are in a different geographical location and can only be accessed after authorization. The wallet seeds are also stored in a physically secure location and are separated from the wallets they are expected to restore.