Since I don’t have a social media presence and wish to remain anonymous anyway, I’ve only managed to share this blog with a small number of people, but I’ve received great feedback and criticisms. Thanks everyone!
I made the most interesting discovery inspired by one of these discussions — a way to greatly simplify OBTC. Recently, Coinmetrics introduced their Free Float Supply metric. After some testing, I’ve found that simply dividing Realized Cap/FFSupply arrives at a result very close to OBTC. OK, so obviously calling it simplified is just a selfish perspective — just reading through Coinmetrics’ paper on Free Float methodology, it’s a lot more in-depth and complex than what I was using. But, for the average user, it is simpler as you can simply collect two calculated variables from Coinmetrics.
It should not be surprising, I suppose, given the base metric for both is the good old Realized Cap, and the FF Supply also attempts to broadly account for BTC’s nature as store-of-value by subtracting supply which isn’t going to be available any time soon. The divergences are within 5% for the most part. I’m actually using a more approximate method than Coinmetrics, because, of course, I’m the amateur here and lack the forensic tools.
I’ll continue to use my original model and post the results here, particularly because I’m not able to replicate Valuation Gap as well with the simplified model. I don’t know why just yet, could be because of a different methodology being used, but I believe it is largely because neither Realized Cap nor FF Supply account for long-term volatility shifts and medium-term active supply like OBTC thus. I’ll try to see if I can shoehorn some of the characteristics of OBTC on to the simplified model, but so far I haven’t found an easy way.
I’m happy to see that there’s a simpler version of the same concept available. On that note, I’d also recommend everyone using Realized Cap, in metrics like RUPL or MVRV, to now adjust it with FF Supply — a more “Organic” Realized Cap, so to speak.
