Bitcoin Mean Dollar Invested Age

[crypto1010]

The Mean Dollar Invested Age, a metric developed by the Santiment team, equates the average investment into BTC at a given point in time (Learn More Here).

The metric is based on the average price invested into BTC held outside of exchanges. Based on historical data, the MDIA index can be a good indicator of bull/bear phases. During accumulation periods, like 2017, the MDIA reaches very high levels. On the other hand, sharp drops in MDIA point to BTC purchased at "expensive" rates being sent back to exchanges, and such events seem to be followed by price drops.

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[DarkDays]

So if I'm reading this right, the chart basically displays the average amount of USD invested in BTC at different timeframes.

It's interesting to see that at the absolute peak of its rise in 2017, the average dollar amount invested reached a low point, and yet this has gradually increased throughout what most people would describe as a bear market.

I wonder if this simply represents all the retail investors putting in whatever they can during 2017, whereas nowadays people are going all in since it's at a low point (in terms of value).

Nice metric though. Where did you get the chart?

[Cnut237]

It is kind of interesting, and I understand why they are making the approximation whereby "For each coin we see how long it has stayed at its current address and we compute the average of all those ages." ... It must be insanely difficult to calculate otherwise.

But I'm not convinced it's telling us a huge amount. Unless I am misunderstanding, then a big influx of new money - for example end of 2017- will cause the MDIA to drop to a very low value, and then after this if we see very little new money coming in - for example due to the protracted bear market - then the MDIA will rise steadily. Indeed if the new money coming in is almost zero, then the rising line is perfectly straight.

So in general, you'd expect an inverse correlation with BTC price?

[joniboini]

So in general, you'd expect an inverse correlation with BTC price?

It was supposed to be a linear relation if you take a look at the source. It seems like the graph was made by another user and they deliberately showed an inverse relation graph. The "drop" in the MDIA on the graph above must be interpreted as a higher point of MDIA and vice versa.

[hugeblack]

We cannot relate what is happening now to historical data, as we are witnessing a complex economic and health crisis. But the index in general interacts strangely with the price.
Is there a ruling equation for the relationship between average investment and price? Is it direct or opposite?
In fact, I only see a study of the behavior and psyche of investors more than their investment (Mean Dollar Invested Age.)

[Cnut237]

So in general, you'd expect an inverse correlation with BTC price?

It was supposed to be a linear relation if you take a look at the source. It seems like the graph was made by another user and they deliberately showed an inverse relation graph. The "drop" in the MDIA on the graph above must be interpreted as a higher point of MDIA and vice versa.

I don't know. The chart at the link supplied does have that sharp drop at the end of 2017, unless I'm reading it incorrectly - the lighter of the two blue colours is the MDIA?

During accumulation periods, like 2017, the MDIA reaches very high levels. On the other hand, sharp drops in MDIA point to BTC purchased at "expensive" rates being sent back to exchanges, and such events seem to be followed by price drops.

But how can MDIA increase during high accumulation? If we mean new money coming in from fiat, or even just into new bitcoin addresses, then that's a reduction in MDIA, surely? More significant if the price is rising, but still true regardless of price. Even quoting from the site: "Every price top so far was accompanied by a drop in the mean coin age and with a significant drop of mean dollar age. During the top on January, 2018 the dollar age went down to just 9 weeks."

A sharp drop in MDIA has to be tied to new money coming in, which is generally when prices are rising, so an inverse relationship between MDIA and price. And then with a long bear market and no new money coming in, the MDIA rises at almost a day per day. That's all it's saying, isn't it? I can see that the metric is of some interest, but I can't see any profound insights.

[joniboini]

I don't know. The chart at the link supplied does have that sharp drop at the end of 2017, unless I'm reading it incorrectly - the lighter of the two blue colours is the MDIA?

You're right. Seems like I misread it. My bad.

[rexxarofmoknathal]

So it seems people are investing more now, than at the highest of the 2017 bull run? Curious indeed.

We really need to know where this money is coming from, if it's institutional money then that's definitely a good sign, whereas if it's dumb money from retail investors we can't really be sure where the industry is headed.

Only time will tell.