Thank you for attending the lecture in Steemit-Crypto-Academy Season 4 & doing the homework task-1
> A HODL wave is created when during a rally a large amount of transaction happens till the peak and later that BTC UTXO remains a hold/stable in a particular wallet
As such everyday transactions are happening in BTC. And more transactions volume also signifies the utility of a network. But if you identify the HODL wave distinctly from these transactions, then you will notice that from these transactions, a part is aging into the subsequent age group of 1 yr, 2yr, 3yr, etc.
So when you notice a pattern converging into a higher age group then a HODL wave (1 & 2 as indicated in the chart) will occur. And it is really a useful indicator because before a rally or bull cycle you can notice such a pattern.
At the bottom of the chart you can not find any such pattern, because they are all noise, irregular spikes-- daily, weekly or monthly transactions, but towards the upper end, it is more clear and distinctly visible, how the users have not moved their asset for a long time.
Further, if you look at the upper band, the age group like 3 yr, 5yr are getting thicker with each subsequent year, which means there has been an accumulation of coinage in this age group, which further signifies the HODL wave in the making.
UTXO accounting structure is really useful to identify such HODL trends.
So what does it signify-- If there is a strong HODL wave, for any given demand the supply is less, hence there is a likelihood of occurrence of a strong rally.
>Overall if we analyse from A to E (3 months) active addresses dropped about 37% but there was an increase in price about 50%
Yes, because Etherum is a Smart contract-based platform that insets thousand of dApps, so it may or may not properly correlate the number of active addresses count with price action. UTXO model correlates to it properly.
Further, please note that active address count indicates the adoption rate, more users joining the ecosystem, but we also have to correlate this with the address(with the percentage of supply), as that plays a vital role in supply/demand dynamics.
> In the short term increase or decrease of active address does not much influence the price movement but in the long term as the participation increases(an increase of active address) price also increases.
That's correct.
> Transaction Volume
No data available on Coin Matrics
> Exchange Flow Balance
No data available on Coin Matrics
You should have had used Santiment and/or other on-chain metrics services to analyse the price action.
> It should not be used to predict the price movement but can be used to determine either at the current price the asset is underpriced or overpriced.
Yes, it is a lagging indicator, so should be used with other indicators.
> In NVT value market capitalization is used for calculation but unlike the stock price, it can be manipulated easily for low volume coins. E.g a token can be created with a circulation supply of trillions and few coins traded on high value will show the false market cap.
That's correct, the more accurate approach is to take circulation of coins/tokens for a given period into account, which will filter out excess/false transactions.
> Onchain analysis has no or little value to short-term traders or scalpers, as these metrics usually produce signals for longer-term market cycles.
That's correct.
**Observation/Suggestion/Feedback:-**
- The author has demonstrated & analyzed the on-chain metrics wrt price action of ETH both in the short term and long term.
- The author has used Coinmetrics(free) to analyze the price trend in ETH, however not all the metrics are free in Coinmetrics, and not all the metrics are exactly available, so the Author is advised to utilize the other on-chain metrics services to comply with the Task requirement in such a case.
- The analysis is quite good and does elicit the understanding & use of particular on-chain data.
Thank you.
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**Homework Task -1 successfully accomplished**
**[8.5]**
Criteria|Calculation
------|------
Presentation| 2/2
Consistency, Compliance with Topic| 1/2
Quality of Analysis| 1.5/2
Clarity of Structure & comprehensive understanding | 2/2
Originality| 2/2
***Total***| ***8.5/10***