HODL Waves: What the Coin Age Distribution Reveals

What do HODL Waves reveal? They show how old bitcoin is, meaning how long each coin has sat since it last moved on the blockchain. From this you can read when old holders sell and new ones buy. In every major rally, many coins suddenly became young because old holders sold to new ones. In the bear markets that followed, they aged again. Dhruv Bansal of Unchained Capital made this picture well known in 2018.

Most charts show the price. HODL Waves show something no exchange price can show: the behaviour of all holders over the whole history. That makes them one of the most intuitive on-chain pictures, even without a formula. "HODL" is a typo from a 2013 forum post that became the motto for holding. What lies behind it is described in HODL psychology.

What HODL Waves show

Every unit of bitcoin sits in a UTXO, an unspent transaction output. Every UTXO has a date: the day it was created, that is, the day of its last movement. A coin's age is the time since that day, not since it was mined.

HODL Waves sort all bitcoin by this age into bands and show, for each day, what share of the supply lies in which band. Stacked on top of each other, this gives a chart of coloured layers that move like waves over the years.

Typical bands are:

The exact bands differ between data providers.

Where HODL Waves come from: Unchained Capital, 2018

Dhruv Bansal, co-founder of the bitcoin financial services firm Unchained Capital, published the first part of the series "Bitcoin Data Science" in April 2018, titled "HODL Waves". He analysed the entire blockchain and, for the first time, showed the age distribution across the whole history.

His finding: after every big rally there was a pattern of nested curves. During the rally, many coins suddenly became young because they changed owners. Afterwards this surge of young coins moved month by month into older bands, visible as a wave that swelled first the 1-month, then the 3-month, then the 6-month band. Bansal's summary: after every great rally, there has been a great hodl.

Data providers such as Glassnode have adopted the chart and added variants.

Realized cap HODL Waves: by value instead of amount

Classic HODL Waves count amounts of bitcoin. A variant, the realized cap HODL Waves, weights each band by the price at which its coins last moved. Young coins bought expensively in a rally thus get more weight than old coins from the time when bitcoin cost a few dollars.

This variant shows the inflow of new money more clearly. At the tops of 2017 and 2021, the value share of young coins rose sharply: a lot of new money bought at high prices. How the average price of all coins is calculated is explained in the MVRV ratio.

What the waves reveal about cycles

In rallies, coins become young. When the price rises strongly, long-term holders sell part of their coins to new buyers. The bands above one year shrink, the bands below three months grow. This was clearly visible at the tops of 2013, 2017 and 2021.

In bear markets, coins age. If you don't sell, your coins move into older bands day by day. The share of coins unmoved for over a year rose markedly in the bear markets after 2018 and after 2022. In 2023, according to on-chain providers, it reached record levels of around two thirds of the supply.

The change of hands is the cycle. In rallies, bitcoin passes from patient to new holders, and in bear markets back into calm hands. Some of the buyers at the top become long-term holders through the bear market; the others sell at a loss. That loss is measured by SOPR.

HODL Waves next to the Power Law zones

This site's Power Law places the price relative to a trend that depends only on time. From it come the five valuation zones. HODL Waves do not measure the price but who holds. Still, the two pictures fit together well:

The benefit of combining them: the Power Law tells you where the price stands. The waves show whether holders see it the same way. A price near the floor while the share of old coins grows means long-term holders are not selling. A price near the top band while old coins become young in large numbers means the experienced are handing over.

Where HODL Waves mislead

Lost coins look like conviction. The band over ten years holds Satoshi's estimated million or so bitcoin and many coins whose keys are lost. They will never move again and make the old bands thicker than the number of real holders justifies.

Exchanges and ETFs blur the picture. Since 2024, ETF custodians have held large amounts in cold wallets. These coins age although the shares are traded daily. Conversely, an exchange rebuilding its wallets makes millions of old coins young in one go, without anyone selling.

Moving is not selling. If you move your bitcoin to a new wallet, for example a multisig wallet, you reset the age of your coins to zero. To the waves, that looks like a sale.

No timing. The waves describe phases lasting months or years. For the question "today or next month?" they offer nothing.

What you take away as a long-term holder

1. Holding is the normal case. Most bitcoin has not moved for years. If you hold your bitcoin in your own wallet for years, you are doing what the majority does.
2. Rallies are when the experienced sell. When the young bands swell and the price is at the top band, newcomers buy from veterans. That is not a good moment to top up on credit.
3. Bear markets are collecting phases. When the old bands grow, supply is scarce. With a savings plan you automatically buy along in these phases. How a plan behaves over a whole cycle is calculated by the cycle calculator.