Preface
In the dynamic world of digital assets, the partnership between U.S.-based Coin Metrics and Swiss firm Bitcoin Suisse, two prominent research teams, reflects the global nature of this industry. This collaboration leverages Coin Metrics' data-driven approach and Bitcoin Suisse's market expertise to delve into the topic of token supply transparency and its impact on liquidity. Thanks to the transparency of public blockchains, we can now monitor fund flows between crypto wallets in real-time, providing unprecedented insights into supply dynamics and liquidity. This joint effort promises enlightening results in the realm of digital assets.
Executive Summary
Transparency is one of the paramount attributes of crypto assets. In essence, transparency is what enables any holder of a crypto asset to verify the integrity of that asset’s monetary base and have assurances around its liquidity, concentration and usership. This report makes full use of the transparency of digital assets to explore the supply and ownership dynamics of bitcoin (BTC), ether (ETH), as well as several ERC20 tokens. The metrics and data presented herein constitute a framework that can be used to evaluate the fundamentals of any digital asset.
We begin by introducing the idea of free float supply in the context of crypto assets. Arguably one of the most critical metrics for crypto assets, free float supply provides a better understanding of an asset’s liquidity by removing tokens that are not able to be freely traded, such as tokens under vesting conditions, or tokens that are held by long-term investors. In turn, this enables a more realistic assessment of a token’s market capitalization and overall maturity.
Then, we turn our attention to the characteristics of the various holders of a crypto asset. Leveraging once again the transparency of the underlying ledger, we group holders on the basis of length of ownership of an asset. We provide a full distribution of ownership duration and demonstrate visually how this can be used to assess the conviction of the holder base. This exercise also sheds light on whether an asset is being primarily used as a store of value, or as a medium of exchange.
Finally, we look at ownership dynamics at the address level in order to determine the distribution of wealth of not only BTC and ETH, but also a wide range of ERC20 tokens. We look at holder segments with a balance greater than USD-denominated thresholds to better understand the predominance of retail versus so-called whale investors. We also provide a similar analysis looking specifically at large investors holding substantial portions of a digital asset’s supply.
