How On-Chain Data Makes Your Love Life Better - TOKEN2049 Singapore 2023

well hello I uh before this talk starts I'm going to give you a disclaimer that I am not actually a Love Guru I'm an onchain analyst but I'm going to give some good news to the audience in here today um so it turns out the numbers say that if you put crypto in your dating profile you will have 33% Chance High of getting a date and uh particularly for the audience here that's usually uh male uh male dominated it turns out that 50% of your marketability to women is based on your resources and Status so in effect you must become a crypto OG so what I'm going to do is get you up to speed with onchain analysis so this can improve your dating life and first thing I'm going to go over is traditional markets so this is a price chart could be anything any tradable asset Bitcoin ethereum test lock so forth um you'll notice there's two Dimensions to this uh data it's only price and time and so here's another exhibit this is a non-obvious market this is one of um the marketability of men and it again it is price over time smv by the way stands for sexual market value within the dating game so it Peaks at 35 and decays after that just to complete it this is uh the smv for women in the dating game so all these things are markets um if you want to go deeper to get insight you know you get stuff like this right this is the uh value that men look for in women in long-term relationships looks age faithfulness and it turns out there's two markets there's a short-term Market which is um what I'll show you next and the long-term market for long-term relationships the short-term hookup Market 80% looks so this is a idea of what we're getting to with onchain analysis we are lucky and blessed in this world of onchain all these networks drop transactions on a blockchain which we can read and from that we can build up a a deep picture of fundamentally what's going on so I'll take you through a history of within the Bitcoin World which was the oldest blockchain with the most data um the first semblance of this world where we could measure onchain metrics was The Proposal of measuring not only uh the transactions moving between investors but just looking at how long those coins had stayed latent in a wallet before they moved and this concept was called destruction Bitcoin days destroyed in 2011 and it's it's really the notion of that the guy that's the OG that's had their coins in the wallet for say8 years and they bought it for $100 and sold it for say $30,000 has more weight than the guy that bought it last week and sold it straight into the market so in 2019 I created this model uh the CV DD floor and that is that was created in where the purple dotter is on screen um 2019 we had like three bottom B market bottoms and um it did predict the bottom price for the following Beer Market and again this is working on the idea that um if someone who had bought their coins from an eon ago for $100 and sold at a much higher price then must me the New Comers into this network are um perceiving a much higher valuation so it's using that to create a prediction around the the floor price come uh 2013 2014 we started looking at the volume moving between investors um and from that uh I created mvt ratio which was uh really the First Market onchain metric that we had uh it works a little bit like price earnings ratio on the one hand you're looking at the volume moving on the blockchain between investor to investor and that activity is high against the valuation of the network the market cap then you get a low ratio like a low PE ratio um and you'll see that in these zones where the PE Ratio the mvt ratio is low we set up for a a bullish run on the market um so that's an old metric uses volume but a lot of that volume now has moved to exchanges which is blind onchain so this this is a metric that's probably past its used by date uh gives you an idea a lot of things are changing quickly in this world uh Nick Carter came a lot in 2018 with realized cap with his team at coin metric and that birthed a new series of of kind of analysis and here we're looking at the cost basis of when investors bought into their coin and that that branches out into a whole um number of metrics around um profit and loss that you can detect on chain on screen is uh an example where we're looking at the cost basis for the short-term holders versus long-term holders when they cross and dip when the short-term guys get wrecked deep enough in the beer markets to be around the zone or below the zone of long-term guys uh that's a market bottom um many many signals you can boot from this here's a nice chart um it's a pretty chart it's just a picture of um the density map of really where people have bought their coins over time um so this is about price Discovery and lately in 2022 glass node have been uh working on clustering the address spaces to get a idea of the cohorts um and what activi is happening in a much more um sort of atomic level so this is a heat map of whales to shrimp selling into the market or buying in the market versus price so that gives you an idea of some of the things we can do with onchain analysis um so enough of that and we can just pull up some charts and have a look at what's going on in the market currently um one of my favorites is looking at what is happening on the exchanges in the long-term view in 2017 you see that we had a lot of coins stack up in the exchanges and that was very much along um the 2017 bull market where retail came in they liked the experience using um exchanges instead of managing private keys and that sea change a CA change happened around 2020 around the coid crash and that was where the institutions started coming in high net worth officers uh Michael sailor with um the institutional drive with corporate treasuries and and you'll see that they started scooping coins off the exchanges and putting into custodial um wallets and so that that's switched the change and what you're seeing here is very large players coming in to take those coins and accumulate and very recently we had um a a loss of trust post FTX where further um Step change in in coins moving off exchanges so um this next chart is coming from glass node some of their research uh what we're see here is really um in this case the flows of transactions going into exchanges and we're building up a heat M based on size and again you see in the early days around the 2017 era there really an expansion of market cap and the transaction size are getting bigger as the whole um industry is getting bigger and then come um this era now we're seeing a drive downwards and transaction sizes which is signaling retail is really coming in but meanwhile we are seeing very large whales and institutions have activity on exchanges also so there's an um expansion envelope so uh what you're seeing here is a maturity of the market on the Bitcoin Network um again this is a visualization of the ratio of paper Bitcoins coming from the Futures markets per options um and that's a ratio with the very very highly liquid coins that you can see on chain are moving between investors and likely to be traded and So currently the paper markets reflect up to 30% more coins in the system over the actual coins that are being traded so again the paper markets are maturing and um some of the work that we do in Crest we're mapping out the ecosystem of hedge funds and this is their monthly profit and loss uh and you can see just the sheer number of lines that we're tracking is getting denser as the herds coming in a lot of institutional hedge funds now are starting to uh make make their way into um into the the the trading of these assets so um that has brought something pretty interesting within um Bitcoin as an asset uh the blue line is the well here I'm picturing Shar ratio which is the risk adjusted return of Bitcoin and you'll see that Bitcoin was far ahead above any other macro asset as it was gaining adoption expanding at a very very rapid race in uh pace and since the 2019 2020 era we've seen that do a step change downwards and unlike what we see a lot in the social um Twitter space um as Bitcoin is early we're actually seeing the first signs of Bitcoin being traded like any other macro asset the sharp ratio of Bitcoin now is the same as or similar to that of the S&P 500 gold um if I put Bonds in there you'll see it's all Trading within the same band of Shar ratio so um that's that's it for Bitcoin it is an asset that is very much maturing um and just to get you up to speed with some of the onchain world in ethereum um the big story as everyone knows is the growth of Defi and this is it here the total value locked up in the uh Bitcoin ecosystem is a percentage of the market cap and you can see that we had this huge exponential climb in mid 2020 and that has not really died off even in the latest Beer Market it's still holding on very strong to the capital and you can see that rise in the fees this is data coming from forecast Labs monitoring the fees um being paid uh very much a uh indicator of the activity on these networks and as ethereum's taken a lot of this activity with a huge spe fees explosion very expensive use the network you can see the al2s L twos here I've pictured polygon take taking out some of that load and you can see how it's impacted um a lot of the the fees cost on ethereum so a number of our twos are now taking that so a lot of innovation happening and um adoption is happening here um and what I like in onchain is that we can monitor all of these transactions so here the RVA lending pool um glass note has been a to build a liquidity heat map showing effectively the liquidation levels so this is a picture of risk if you're in the landing pools the the white line here is is ethereum um so we're just seeing where the the collateral there if it drops um below certain parts of the heat map these are the the the um the liquidation Le you will see and similarly on the on the Unis swap decks this is where Traders are putting their bids in ass so a picture of liquidity so um very much um in this world of defi we would not get this data in the trade f World maybe if you're a very large institution like Fidelity you can pay for this data but what's different in this world is it's open all transactions you see here is open on the network and it's available to us uh so very much um an amazing space where we can see what's happening except in this Zone here this is we've got $125 billion of stable coins um and none of it is onchain verifiable and that's because for the ones that really have worked and stood the test of time they really back onto the banking system and use and US Treasury so um there's a lot of place for Innovation here for us to build the very first uh provably stable um like stable coin on the network so it's still very early um and I look forward to that being built um some of the New Frontiers I am seeing is um within the Trading Zone where we're starting to get a big influx of hedge funds trading crypto um I believe between 1 and 2,000 crypto trading firms now all trading systematically so some of my work is obviously to map this out we did a survey and we found that only 6% are using onchain data and if you're really trading these markets you want to use non-obvious data and so it's very early in in the game for this and I'll just show an experiment I ran in 2022 just to see if this data actually works for short time time frame trading um and on the bottom of this chart you can see fundamental signals coming down what I'm doing here is just mapping out demand and Supply from the key markets the calendar Futures Perpetual swap flows on and off the exchanges the spot exchanges inferring demand and Supply from the spot markets and even looking into the network looking at the liquidity movements between the the strong hodlers and the the Traders and seeing where demand Supply is happening there the algorithm looks at um all of these measures of demand Supply and comes up with a signal which is shown on the heat map at the top red when it's bearish blue when it's bullish and the strategy um shows promise you know it is outperforming a hotle strategy so what's interesting about this is this algorithm doesn't even know what price is doing it's trading blind it's just looking solely in the fundamentals without knowing what price is doing so I maintain there's a lot of um signal that is not being used within the Quant World um and then I'll close with a story very much um a story that um we were exposed to within um Crest uh I I asked uh one of the hedge funds which I thought was closest to FTX in July sorry November early November the 7th uh 2022 and I said hey guys how do you feel about the soleny of FTX right now posted the chart of Bitcoin collateral on FTX draining at a frightening rate and so they po they said back to me hey Willie we aren't worried about alamat or FTX FTX is probably the most transparent and well-run exchange in crypto and this is what transpired pretty much 48 hours later um at the 3ac collapse there was a massive flow of collateral that left FTX exchange and it seemed to me uh there were insiders that knew what was going on and there was a consistent slide of collateral coming off that EX change and um a final collapse in early November so 1 month later C's banking group you know there are 30 23 billion banking group 23 billion of client assets there are alternative hedge fund um approached us saying now is the right time to build a crypto funer funds allocating into crypto trading to generate a yield for uh their clients and um what transpired was a very long conversation with the founder of the bank who was 70 and their RIS team took weeks to get over the line they thought are you guys crazy post FTX this place is the wild west and this was the solution that we uh sold to them uh this is effectively the same sort of chart we are now monitoring claro all of our um exchange counterparties both Bitcoin ethereum staes and we have a a risk team that is monitoring the signal 24/7 First Response Team gets in they notify the second response team which is a team of analysts who make the call whether or not this data goes out to our fund manager so they can take appropriate action so um we feel much more drisk and with that the Insight here is though this industry is not well regulated and it's not in a mature stage of Regulation actually we do have an on chain type of Regulation all these transactions are visible and we do have oversight just through the nature of these networks and and this has gone a long way to pushing this type of product into the trade fire world uh there are billions if going to trillions of dollars of assets ready to come in the the main game is to get the risk out of the equation so overall this era is moving very very fast um a lot of innovation is happening I hope I've got you up to speed this is just a quick tour of what's happening on the onchain world and this is all so you can have um more success in getting your dates and I'll just uh leave you with one final tip when you get that first date if you pay by Bitcoin the data says you've got 74% chance of getting to the next date if you pay for dinner with Bitcoin thank you very much everyone