On-Chain Metrics [Part 2] - Crypto Academy - S4W3 - Homework Post for professor @sapwood by simonnwigwe

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On-Chain Metrics [Part 2] - Crypto Academy - S4W3 - Homework Post for professor @sapwood
![s8.PNG](https://cdn.steemitimages.com/DQmWGQJhdSUR34k4UQyjMwNtLxBGAzKNvYWdpXrQyytX8Co/s8.PNG)
![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)



<div class='text-justify'>
Hi steemians, <br>
Welcome once again to my blog. This week I am attempting the lecture delivered by professor @sapwood on the topic On-Chain Metrics [Part 2]. In week 1 we discussed Part 1 of this course so this is just continuation of the course. 
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)
<div class="phishy">
1.) What is the difference between Realized Cap and Market Cap, how do you calculate Relized Cap in UTXO accounting structures? Explain with examples.
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)


<div class='text-justify'>
When we talk about the term Market Cap of an asset, we are simply referring to the product between the price of the asset and the circulating supply of they said assets. That is<br>
Market Cap = Price of asset * Circulation supply
</div><br>


![IMG_20210924_123024.jpg](https://cdn.steemitimages.com/DQmfZse4Sfw7fivFKGExyse7KpMzKPA1LFPEXfu493Vpgje/IMG_20210924_123024.jpg)

<div class='text-justify'>
From the screenshot above, let's use it to see how the market capitalization is been calculated. Using XRP coin to perform this analysis, the current price of XRP is $0.9092 and the circulating supply is 46.72B XRP therefore using the relation above, we can say that the Market Cap = $0.9092 * 46.72 = $42.477824
</div><br>

<div class='text-justify'>
The Realized Cap is slightly different from the Market Cap of an asset because it takes into cognizant the unspent coins UTXO and the time the said asset was last transacted.  This means that the realized cap works with UTXO price based on the time it was moved last. That is Realized Cap=Value * Pricecreated [USD] (of all UTXOs)
</div><br>

<div class='text-justify'>
Example: Let's assume XRP has 15 UTXOs in total with a circulating supply of 15 XRP. Let's say 4 UTXOs have not be moved since 2016(with the price of as $150 on the day it was last moved), 2 UTOXs have not been moved since 2019(with the price as $15,000 on the day it was last moved), 5 UTOXs have not moved since 2021(with the price $35,000 on the day it was last moved)
</div><br>
<div class='text-justify'>
Then the Realized Cap = (4*150) + (2*15000) + (5*35000)<br>
Realized Cap = 600 + 30000 + 175000<br>
Realized Cap = 205,600 USD.
</div><br>
<div class='text-justify'>
Similarly, we can use the same method to calculate the Market cap of XRP using the current price $0.9092
</div><br>
Market Cap = 15 * $0.9092 = $13.638

<br><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)
<div class="phishy">
(2) Consider the on-chain metrics-- Realized Cap, Market Cap, MVRV Ratio, etc, from any reliable source(Santiment, Glassnode, etc), and create a fundamental analysis model for any UTXO based crypto, e.g. BTC, LTC [create a model for both short-term(up to 3 months) & long-term(more than a year) & compare] and determine the price trend/predict the market (or correlate the data with the price trend)w.r.t. the on-chain metrics? Examples/Analysis/Screenshot?
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)

**Realized Cap**
<div class='text-justify'>
The Realized Cap is slightly different from the Market Cap of an asset because it takes into cognizant the unspent coins UTXO and the time the said asset was last transacted.
</div><br>

Short Term (3 Months)

![IMG_20210925_113053.jpg](https://cdn.steemitimages.com/DQmQsXZimBX8nAx9rPGKu3UcxVaEzms4S1FwYqXUVFLPdTG/IMG_20210925_113053.jpg)


<div class='text-justify'>
From the screenshot above you will notice that the price of BTC and the realized cap was moving in range through out until it got to 25 July 2021 where the price experienced an uptrend movement. The price from that moment continued experiencing higher high and higher low. When it got to 04 Sep 2021 the prices started experiencing a downtrend. Then we started noticing lower high and lower low till 24 Sep 2021. Within this period, the highest price the coin got to before dropping is around 53.1k but the drop has brought it back to 42.3k. The realized cap moved up to 372.53B
</div><br>

Long Term (3 Years)


![IMG_20210925_113210.jpg](https://cdn.steemitimages.com/DQmT2JyY3BsV2nyXoDsEGCEB4tpPtzD5UQVrk2KvYxg4SDp/IMG_20210925_113210.jpg)

<div class='text-justify'>
Here there was a range price from the chart seen above from 28 Jan 2018 and it continues that way till it got to 23 Aug 2020 where the realized cap moved upward in line with the price. On getting to the 18 May 2021 there was a serious drop in the price of the asset which ranged from 56.5k down to 33.0k but the realiazed cap kept moving upward not minding the direction of the price. The realized cap move up to 372.53B.
</div><br>

**Market Cap**

<div class='text-justify'>
Market Cap of an asset is simply reffered to the product between the price of the asset and the circulating supply of they said assets.
</div><br>

Short Term (3 Months)

![IMG_20210925_113256.jpg](https://cdn.steemitimages.com/DQmSeH3JMCcZKG79RQNpW4s3BN4Pm1x7eAKTP9DxgzYs6QB/IMG_20210925_113256.jpg)


<div class='text-justify'>
From the screenshot above, you will notice that the market cap and the price of BTC is in a simultaneous movement. From 20 July 2021 you will notice a significant raise in the price of the asset as well as it's market cap. As at 24 Sep 2021 the price was pegged at 42.4k and the market cap is at 798.92B. 
</div><br>

Long Term (3 Years)


![IMG_20210925_113238.jpg](https://cdn.steemitimages.com/DQmWWpBE2GWJXDvBFQWRM6wgwFkCtVA9Q13hQgUtMVvXyke/IMG_20210925_113238.jpg)


<div class='text-justify'>
Similarly, in the chart above we can see the movement between the price and the market cap in a simultaneous movement. From 11 June 2018 the price and the market cap continued moving in range. From 11 April 2020 it started experiencing an uptrend until it got to the peak and started falling back from 18 May 2021 within that range of time it started going up again. The current price of the asset as seen in the screenshot is 42.4k and the market cap is 798.92B.
</div><br>

**MVRV Ratio (Market Value to Realize Value)**

<div class='text-justify'>
This is one of the on-chain metrics features which is gotten as a result of the division between the market cap and the realized cap. That is the ratio of Market cap to Realized cap is what we know as the MVRV.
</div><br>


Short Term (3 Months)

![IMG_20210925_113344.jpg](https://cdn.steemitimages.com/DQmV2WVFM6usRb1CTU7u9JjKEUKhizNvwvgeanH8dAu3YFC/IMG_20210925_113344.jpg)

<div class='text-justify'>
From the screenshot above you will notice the price of the asset is moving in correlation with the MVRV. On the 20 July 2021 you will see a deep drop in the price of BTC I.e 29.3k and price came a little above MVRV from that moment an uptrend started and the MVRV as well as the price of the asset move upward. The present price of the asset as seen in the screenshot is 42.4k and the MVRV is 138.40%
</div><br>


Long Term (3 Years)

![IMG_20210925_113511.jpg](https://cdn.steemitimages.com/DQmbdfDoAAGxaJ2n4n2YA5XTF4ASt89yxz19cA5nQCB9iZb/IMG_20210925_113511.jpg)


<div class='text-justify'>
From the screenshot above, you will notice the absent of the MVRV from 12 Jan 2018 this is because it is lower than 0% and it is in downtrend and it showcase it self from 21 August and that help to push the price movement to uptrend direction. Initially it was higher than price but from 20 May 2021 it dropped below price movement. The price of the asset as at 24 Sep 2021 is 42.5k and the MVRV is 138.40%
</div><br>


**General Observation**
<div class='text-justify'>
From the chart we have seen above on Realized Cap, Market Cap and the MVRV Ratio (Market Value to Realize Value) we will notice that all these on-chain metrics features are actually useful to analyze the price of any coin. Though considering the two terms I believe that the short term does not give a clear and a reliable signal as the long term does. 
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)
<div class="phishy">
(3) Is MVRV ratio useful in predict a trend and take a position? How reliable are the upper threshold and lower threshold of the MVRV ratio and what does it signify? Under what condition the Realized cap will produce a steep downtrend? Explain with Examples/Screenshot?
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)


<div class='text-justify'>
Yes the MVRV is reliable in the prediction of a trend and taking of position. If the MVRV is seen above 100% and it records higher highs and higher lows we can say it is a good bullish trend and a buy position can be taken at that point. Similarly, when the MVRV is seen below 100% and it records lower low and lower high we can say it is a good bearish trend and a sell position can be taken at that point. 
</div><br>


**Upper and Lower Thresholds Reliability**

![IMG_20210925_113933.jpg](https://cdn.steemitimages.com/DQmPk9vhsvJQ8LFk4GvdXKSH5mwgbnGWZXBhSDCmXuVD7TZ/IMG_20210925_113933.jpg)
Lower threshold

![IMG_20210925_113716.jpg](https://cdn.steemitimages.com/DQmX2spLsiycDt6CcwJsQrQgeSPnnJAdRfQzTSxbfYSgkU4/IMG_20210925_113716.jpg)
Upper threshold 

<div class='text-justify'>
From the charts above, you will notice that the upper threshold does not completely have side effect to the price of the said asset. Upper threshold normal will implies that the price continuous its movement upward. But something unique always happens when ever there is a lower threshold and that is there will always be an uptrend move in the price. So this means anytime where there is lower threshold, it always have an uptrend movement in price after it. So to me the lower threshold is more reliable because anytime it is notice there is always an uptrend move in price immediate after the lower threshold. 
</div><br>


**Conditions Leading to A Steep Downtrend of the Realized Cap.**

![IMG_20210925_112938.jpg](https://cdn.steemitimages.com/DQmSu7mmPcpQsczGQoHvoyKsrCziTQZq9jTvqAGhZ5wMXx2/IMG_20210925_112938.jpg)

<div class='text-justify'>
To me I believe that the one of the condition that will lead to a steep downtrend of a realized cap is when the masses losses their trust or confidence in the said asset. Take for instance, late last year or earlier this year XRP had an issue that lead to the price drop from around $1.5 to around $0.04 this is as a result of the issue XRP had and most people started losing interest in them. 
</div><br>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)

# <center>Conclusion</center>


![mine.PNG](https://cdn.steemitimages.com/DQmRVJAkySHQ6KQEs98RewiF9SzG89HMKkrYRvYspB4WySY/mine.PNG)


<div class='text-justify'>
In summary, there is no doubt that all the on-chain metrics listed above are all use to analyse the price of any asset in the crypto world. We have established that the market cap is the product of price and circulating supply. We also said that the Realized Cap is slightly different from the Market Cap of an asset because it takes into cognizant the unspent coins UTXO and the time the said asset was last transacted. The MVRV is the ratio of Market cap and the Realized Cap. Thank you professor @sapwood for such a wonderful lecture. I do hope to learn more from you in the mext class. 
</div><br>

NB: *All screenshot where gotten from sentiment and coinmarketcap site*
👍  , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , and 70 others
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@successgr.with ·
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@sapwood ·
Thank you for attending the lecture in Steemit-Crypto-Academy Season 4 & doing the homework task-3

> 5 UTOXs have not moved since 2021

Correction:- UTXO- Unspent Transaction Output

> Let's assume XRP has 15 UTXOs in total with a circulating supply of 15 XRP. Let's say 4 UTXOs have not be moved since 2016(with the price of as $150 on the day it was last moved), 2 UTOXs have not been moved since 2019(with the price as $15,000 on the day it was last moved), 5 UTOXs have not moved since 2021(with the price $35,000 on the day it was last moved)

Always try to include a real example, go to the Block Explorer to identify the unspent outputs and take the reference date and price and calculate the realized cap.

> On getting to the 18 May 2021 there was a serious drop in the price of the asset which ranged from 56.5k down to 33.0k but the realiazed cap kept moving upward not minding the direction of the price. The realized cap move up to 372.53B.

The realized cap traded sideway with flat contour or remain shallow in downtrend, that's because the hodlers simply did not want to sell at a lower price. 

> you will see a deep drop in the price of BTC I.e 29.3k and price came a little above MVRV from that moment an uptrend started

But hod did you identify that uptrend??

Please bear in mind that it is a leading indicator, so it does give hints about the upcoming price developments.

So the best way out is to identify the HH and HL in MVRV reading to ascertain the bullish trend. Simillarly, LL and LH to ascertain a bear trend. Also, always take numerical data to analyze it further.

How do I use MVRV to take a position?

First, always refer to the historical upper threshold of MVRV. 

- MVRV is higher than 250%, or 300%, and formed a lower top- Sell signal
- MVRV lower than 100%, but the general trend is bullish(Price Action)- Buy signal
- MVRV lower than 100% with LH and LL- Extended bear market, accumulation zone(long term)

> If the MVRV is seen above 100% and it records higher highs and higher lows we can say it is a good bullish trend and a buy position can be taken at that point. Similarly, when the MVRV is seen below 100% and it records lower low and lower high we can say it is a good bearish trend and a sell position can be taken at that point.

Excellent.

> Upper threshold normal will implies that the price continuous its movement upward.

No.

The upper threshold is ideally a sell signal. But not gurantee always. An impulsive bull leg could very well break out of the historical upper threshold and could mislead a trader. By contrast, the lower threshold is always a support or accumulation zone, so lower threshold is reliable.

> Take for instance, late last year or earlier this year XRP had an issue that lead to the price drop from around $1.5 to around $0.04 this is as a result of the issue XRP had and most people started losing interest in them.

Good example. But it did not drop to $0.04, I think the low was around $0.17-$0.18.


**Observation/Suggestion/Feedback:-**
- The author has demonstrated & analyzed the on-chain metrics wrt price action of BTC both in the short term and long term. 
- The author has used Santiment to analyze the price trend in BTC wrt various on-chain metrics viz Realized Cap, MVRV.
- Practical example using Block Explorer to explain the realized cap would have done justice to this Task.
- Better Quality of Analysis is required to portray a comprehensive understanding of the subject. Always include the numerical data when you correlate with the price. Always identify the HH, HL or LH, LL in the chart to ascertain a trend.

Thank you.

--- 

**Homework Task -3 successfully accomplished**
**[7]**

Criteria|Calculation
------|------
Presentation| 2/2
Consistency, Compliance with Topic| 1.5/2
Quality of Analysis| 0.5/2
Clarity of Structure & comprehensive understanding | 1/2
Originality| 2/2
***Total***| ***7/10***
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@simonnwigwe ·
Thanks professor for the review
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