Bitcoin’s unspent transaction outputs (UTXO) and BTC price prediction

[Hold-n-play]

 I have read some interesting articles focused on Bitcoin’s unspent transaction outputs (UTXO) accounting system and public timestamping of transactions and would like to share it with our bitcoin community. Feel free to leave your comments.

https://medium.com/galaxy-digital-research/price-implications-of-bitcoin-utxo-age-changes-6ec8e1dd6a62

"...increases in the warmer bands suggest that coins that were previously held are now on the move and indicate a higher velocity of the monetary base. According to traditional economic theory, higher velocity, ceteris paribus, leads to higher prices of a monetary base. We can also consider situations where longer-term holders moving “cold” coins to sell them should correlate with lower prices. Conversely, there should be a positive relationship between changes in older age bands and price: an increase in older bands suggest that individuals are holding more Bitcoin and therefore should correlate to higher prices."

[1713892015]

1713892015

[Hold-n-play]

A couple of additions to the sourse. Remember that every UTXO amount is written as a binary number in Satoshis. In other words, for example, instead of UTXO with .5999 BTC, you actually have 59,990,000 sats. But every Bitcoin transaction browser and wallet however, will immediately divide this number by 100,000,000 and convert it to BTC.

Also, please remember in Bitcoin, inputs and outputs do not have to be equal. In other words, outputs can be less than the inputs, and the difference is the actual transaction fee. Many miners reluctant to accept zero-fee transactions, so in effect no transaction's inputs and outputs are equal anymore and still getting into the blockchain.

[bitmover]

Also, please remember in Bitcoin, inputs and outputs do not have to be equal. In other words, outputs can be less than the inputs, and the difference is the actual transaction fee. Many miners reluctant to accept zero-fee transactions, so in effect no transaction's inputs and outputs are equal anymore and still getting into the blockchain.

I think you are making things more confused than they are.

Each utxo(input) will increase your fee, as it will increase your  transaction size. (you can have multiple utxo from the same address)

I made a calculador here where you can see how much multiple utxo will impact your mining fee. Just play around with inputs and outputs.
https://bitcoindata.science/plot-your-transaction-in-mempool.html

There are no zero fee transactions. Nodes won't broadcast them. The only way to have a zero fee tx in a block is that the miner included it by himself:
https://bitcoin.stackexchange.com/questions/69030/how-did-these-zero-transaction-fee-transactions-make-it-into-the-bitcoin-network

[NeuroticFish]

I think you are making things more confused than they are.

This was my take too when I've read this. OP sounds confused and confusing too.
I will even go over the mistakes OP made, they've got explained already in the pretty much duplicate post in the technical area.

I will get to.. simple Bitcoin discussion:
So if I mix some of my coins to various addresses for future use it can be seen in relation with the price?
Also if consolidate some of my funds, again, will affect somebody's price predictions? It doesn't sound right. I just remember that not long ago a big platform (possibly Binance) did consolidate a great lot of its funds. Should I  conclude that such a move has triggered the price drop? Really???!?!?

[Hold-n-play]

First there were no "mistakes" when this was discussed in the technical section, I would rather say "clarifications"

Second it was not my intention to confuse rather I try to bring up a discussion which will further clarify this topic to others including myself. We are all learners. If you expect a perfectly presented introduction then maybe your expectations are unreasonable

With regard to "zero fee confirmations" then this is what has been provided by another user:

  "Zero fee confirmations are still perfectly valid, and miners are quite happy to include their own zero fee transactions. For example, here are a couple from a recent block:
https://mempool.space/tx/bf1b227593c148f6c350ba4eb13422747d337421df3776976ab569864d22a2cc
https://mempool.space/tx/0f03e31fc7226e1641b9a60a426feffc719934f512f453ebc8dbc322877d6070"

Sorry you dont appreciate my intent to discuss something that might be of interest to others. I was hoping that would be somewhat intellectually stimulating.

Was I supposed to present a topic like "If I give 1 btc, what would you do?" Would that be of interest? (I hope not!)

[NeuroticFish]

First there were no "mistakes" when this was discussed in the technical section, I would rather say "clarifications"

We can use any term you prefer.

Sorry you dont appreciate my intent to discuss something that might be of interest to others. Maybe you expect topics like "If I give 1 btc, what would you do?

While I wanted to be helpful and not repeat the same "clarifications" others have done, hence skipping to the more important/useful part, while I had my own questions (I am not 100% sure I understood the conclusions correct), you decided to be rude.
What can I understand from here?

Was I supposed to present a topic like "If I give 1 btc, what would you do?"

If you'd do that I would probably warn people to be wary of a potential scam. There's no free lunch.
Are we getting now closer to the same page?

[franky1]

to clarify.
its not about trends (trends are using just historic market data to pick an old pump and dump and pretend that pattern will repeat itself, by drawing silly MA lines on a market chart)

also when there are things like "whale alert" that use twitter to tell people when alot of value of a utxo just moved to (wrongly) suggest that the market price should shift soon, is another error of thought. (the velocity of volume of UTXO amount does not correlate to market prices)

as others have said, when people use mixers or sweep their wallets, or an exchange moves funds from cold to hot or hot to cold wallet of their own wallets (no purchase or spend or new user acquiring funds,, just the same person re-organising his wallets) .. this is not a sign of any market movement.
most whale alerts and large volume(velocity) are just exchanges re-organising their wallets. so dont put much attention into these

you cannot use UTXO data (combined with market price of date the UTXO moved) to make any price predictions.. .. today, this week, this month..
sorry, you just cant,
it can along with other metrics, help to explain the support and resistance lines of the tops and bottoms of the long term market. and the value window of the long term top/bottom value.

EG large sentiment of the UTXO realised price and the mining costs of different regions do help explain why prices refuse and resist going below certain amounts over a 6 month period. or why they top out where buyers give up buying at a certain amount.

this is not about predicting the price. but explaining why in 2022 the chances of the price bottoming out below $20k or flowing over the top of $100k are slim to none this year
its not about the active market price day to day. nor about predicting where the price will be this week/month..

how to explain this in a more visual way..
the value window and the UTXO value sentiment is like explaining the length of a tennis court, where players will bounce a ball within.. it explains the boundary lines, but not the actively moving ball.
.. it will not tell you how many times the ball was hit, nor where the ball will be at any given time within the tennis court, nor when or if the ball will be at the top of bottom end of the tennis court at any given time.

what you can learn though. is with the strong boundary lines of support and resistance. the odds of a ball going outside the boundary are very slim. at both the top and bottom of the court.

EG if the value window is between $25k-$70k. ($45k length of tennis court) if the ball is being hit alot more in the $25k-$47.5k half.. then that player has good value. because its lower in price than the half way line.. and at the cheap half of the value window.

all you can learn is if bitcoin is currently deemed cheap or expensive. compared to the sentiment of holders, thats it.

[Hold-n-play]

First there were no "mistakes" when this was discussed in the technical section, I would rather say "clarifications"

We can use any term you prefer.

Sorry you dont appreciate my intent to discuss something that might be of interest to others. Maybe you expect topics like "If I give 1 btc, what would you do?

While I wanted to be helpful and not repeat the same "clarifications" others have done, hence skipping to the more important/useful part, while I had my own questions (I am not 100% sure I understood the conclusions correct), you decided to be rude.
What can I understand from here?

Was I supposed to present a topic like "If I give 1 btc, what would you do?"

If you'd do that I would probably warn people to be wary of a potential scam. There's no free lunch.
Are we getting now closer to the same page?

Being rude is a subjective term. I perceive that you have been rude to me in both of your posts even though I did not point it out in the first place.

My suggestions regarding the topic "If I give 1 btc, what would you do?" was a rhetoric question and ironical by nature. I was hoping you would get that.

Since you you have asked "What can I understand from here?" I suggest to end our argumentation and rather move on to the original subject of the discussion.

I want to apologize to the entire community for seeing this exchange and to you, NeuroticFish. Lets the take home message be that we all be mutually respectful. I hope this would end our argumentation.  

[Hold-n-play]

to clarify.
its not about trends (trends are using just historic market data to pick an old pump and dump and pretend that pattern will repeat itself, by drawing silly MA lines on a market chart)

also when there are things like "whale alert" that use twitter to tell people when alot of value of a utxo just moved to (wrongly) suggest that the market price should shift soon, is another error of thought. (the velocity of volume of UTXO amount does not correlate to market prices)

as others have said, when people use mixers or sweep their wallets, or an exchange moves funds from cold to hot or hot to cold wallet of their own wallets (no purchase or spend or new user acquiring funds,, just the same person re-organising his wallets) .. this is not a sign of any market movement.
most whale alerts and large volume(velocity) are just exchanges re-organising their wallets. so dont put much attention into these

you cannot use UTXO data (combined with market price of date the UTXO moved) to make any price predictions.. .. today, this week, this month..
sorry, you just cant,
it can along with other metrics, help to explain the support and resistance lines of the tops and bottoms of the long term market. and the value window of the long term top/bottom value.

EG large sentiment of the UTXO realised price and the mining costs of different regions do help explain why prices refuse and resist going below certain amounts over a 6 month period. or why they top out where buyers give up buying at a certain amount.

this is not about predicting the price. but explaining why in 2022 the chances of the price bottoming out below $20k or flowing over the top of $100k are slim to none this year
its not about the active market price day to day. nor about predicting where the price will be this week/month..

how to explain this in a more visual way..
the value window and the UTXO value sentiment is like explaining the length of a tennis court, where players will bounce a ball within.. it explains the boundary lines.
.. it will not tell you how many times the ball was hit, nor where the ball will be at any given time within the tennis court, nor when or if the ball will be at the top of bottom end of the tennis court at any given time.

what you can learn though. is with the strong boundry lines of support and resistance. the odds of a ball going outside the boundry are very slim. at both the top and bottom of the court.

EG if the value window is between $25k-$70k. ($45k length of tennis court) if the ball is being hit alot more in the $25k-$47.5k half.. then that player has good value. because its lower in price than the half way line.. and at the cheap half of the value window.

all you can learn is if bitcoin is currently deemed cheap or expensive. compared to the sentiment of holders, thats it.

Thank you franky1. This is kind of discussion I was hoping to see!

[NeuroticFish]

Being rude is a subjective term. I perceive that you have been rude to me in both of your posts even though I did not point it out in the first place.

OK, I also apologize then, although my rudeness was not intentional. I mostly tried to express my surprise over the concept you've been presenting. But yeah, I don't find always the best words.

I hope this would end our argumentation.  

Yes please.


So, back on topic:
I guess now that I didn't misunderstand the concept, since franky1 understood the same thing.
He also managed to express better what I tried to say:

you cannot use UTXO data (combined with market price of date the UTXO moved) to make any price predictions.. .. today, this week, this month..
sorry, you just cant,

Since it was compared somewhat with TA, I'll start with that: even TA doesn't always work, even TA is not accurate alone (and can easily get traders into trouble).
I find using this new "metric" - utxo amount and age - for predicting the price to be... more likely a trap than a tool. Maybe I'm wrong, I don't know for sure; maybe my examples are too rare or don't matter in the sheer number of utxo. But I would not trust such a metric, that's for sure. That's how I feel.

[franky1]

following other schemes like whale alerts that watch for high value/volume/velocity new UTXO and try to coerce people into thinking its an indication of an upcoming new pump and dump is indeed a trap and not a tool

just like the silly people that try to predict pump and dumps by doing TA(trend analysis) by marking lines of 'monthly averages'(MA) and finding patterns of old pump and dumps.. to suggest that pattern is about to repeat.. (bad idea dont recommend following these schemes)

the purposes of these silly naive influencers trying to push these schemes onto others.. is simple.
if they can get enough sheep to follow their influencer, when they shout jump and enough people jump they themselves can cause a pump.

its not predictive or analytical. its simply try to make something sound plausible and then get everyone to jump on command. and when everyone jumps on command like sheep. he can say, oh look the price did go up, i told you so.

its not about the data showing something will happen its the influencers pushing people to cause something to happen by using data he drew on some lame chart.
is psychology, not data analysis


much like if the whale alert twitter had enough followers and everyone went on a buying spree every time there was a tweet.. its the tweet that caused the pump.. not the UTXO mentioned in the tweet,

..
here is the rub.. alot of people have got wise to these and so ignore it. where as some others play the opposite game and try to sell when the sheep are trying to do a buy pump. which actually causes a dump before a pump(when no one jumps on the pump wagon). so because these schemes are known and fail. in many cases the attempt to pump actually causes a dump.
(influencer was hoping to exit that week anyway thats why he wanted others to push the price up first, so he can sell for higher price and get out)

so again just ignore these influencers that claim they have the ability to predict the daily price..
one thing you need to learn when someone is telling you to pump.. its because the person shouting he wants a pump is only shouting it so he can sell . because he is actually needing to dump

in short. when media announced elon bought bitcoin a few years ago. he actually bought them months before the announcement. so he bought them cheap. where by the announcement months later by influencers pumped the price unrelated to elons actual purchase. so that the influencers could sell at a higher price.

so be careful about people saying they can predict the active volatile market price daily.. no one can

[Hold-n-play]

I am glad we are back to the discussion concerning UTXO!

Before making own conclusion regarding it, I am wondering if anyone can please explain why are UTXO's necessary in the first place? For example, I need to spend 0.09 btc to buy 0.08 btc and receive 0.01 back? Would it be less complicated when the system would simply allow me to spend 0.09 btc and receives nothing back? I am sorry I might be asking some questions that have obvious answers I am kind of new to this concept myself

PS. I edited my intro because it does sound as if I am suggesting that UTXO could be a better predictive tool than TA. It is not my intention to advocate UTXO, I am just trying to understand it.

[odolvlobo]

"...According to traditional economic theory, higher velocity, ceteris paribus, leads to higher prices of a monetary base."

I didn't have the patience to analyze the article in detail, but that statement looks like an error because the opposite is true, according to the Quantity Theory of Money.

In short, MV = PQ, where M is the value of the money supply, V is the velocity, and PQ is the aggregate value of trade. It is basically stating the obvious. It says that the amount of money times the number of times it is spent is equal to the total amount of money spent.

If you rearrange the terms, M = PQ/V, you can see that the value of the money supply is inversely proportional to the velocity. That is, if the velocity increases, then the value of the money supply decreases, ceteris paribus. It should be intuitively apparent that if the same money is used more often then its value would have to be less to pay for the same amount of products.

https://en.wikipedia.org/wiki/Quantity_theory_of_money

I am wondering if anyone can please explain why are UTXO's necessary in the first place?

The UTXO system simplifies the protocol. It simplifies double spend validation and removes the need for a concept of an account.

[franky1]

the issue with just 'crediting' / debiting an address. where its just an address with a single value that increases and decreases is this:

when you want to pay another person you would need to ensure in YOUR transaction that their side is updated too. for it to be a successful payment
EG (as an example of you spending 0.08)
before
YOU 0.09btc    them 0.1

after
YOU 0.01btc    them 0.18

this means at your end you would need to seek out their balance first, and then update their balance within your transaction, aswell as your own balance for it to be a successful payment.
this opens flaws up of manipulation because if your able to change their balance. you can nefariously change their balance.
(EG why not just make their balance 0)

some altnets tried to counter this by only allowing your control to be to make your balance less and their balance more.
. however this then runs into more problems

imagine the blocks are 10minutes apart
remember there is no central agency, its all independent decentralised payments
lets say 4 people wanted to pay you 0.001
EG
before
YOU 0.09btc    personA 0.1   personB 0.1    personC 0.1    personD 0.1
they dont know about each other. nor realise the other 3 people are trying to pay you at the same time
at making the transactions.. each person would makes a transaction
personA 0.099   YOU 0.091
personB 0.099   YOU 0.091
personC 0.099   YOU 0.091
personD 0.099   YOU 0.091

to them individually. they are doing the honourable thing. deducting 0.001 from them and crediting 0.001 to you

because they all looked at your confirmed balance at the same time as being 0.09 and your balance wont update for another 10 minutes if there were changes,, so thats what they presume. so they all presume your new balance is going to be 0.091

so when in the block. they have new confirmed balance of 0.099 for themselves each (losing 0.001 each, totalling 0.004 gone on their sides combined)
but your balance has been updated 4 times for the same amount as they didnt know about each other in that 10 minute window
thus your at 0.091 not 0.094
remember there is no central agency, its all independent decentralised payments
..
some altnets tried to counter this by having separate accounts/balances per partnership.
where both partners had to sigh a joint account to authorise both sides agreement of balances..
 though that got complicated about how to get balance out of one partnership and into another should they wish to spend balance elsewhere.
..
this is where blockchains came in.
it solved many problems.

by not being a 'account'/total balance log system.
it instead was a chain of custody system. which is not updating a balance. but instead giving slices of units of a previous chunk of unit. whereby showing where the value originated from(mining) where it was spent and how much of the chunk was being split to whom.

this meant being able to receive different amounts from different people into the same address without it impacting each other or affecting each other. as its was(outside the blockchain) counting the units received rather than updating a single log of balance

it also allows spending the slices to combine them into chunks should you only wish to have one unspent chunk value associated with your address.

this became auditable where every unit of measure is accountable and checkable so no new value can be invented. also it meant they didnt need to co-sign a transaction or be awake to receive/authorise it. you couldnt fiddle with their other funds they pre-owned. and all the other flaws were gone.

..
to make it far easier to calculate total coins associated with an address, that came from different senders. separately from the chain of custody log, instead of interrogating the chain every time and working out which coin had been already spent and not spent, to work out what to include or ignore in updating the (outside) balance. a separate database was added that just indexes the values that have not already been spent. so it saved reading time as everything in the unspent database is just that. the unspent balance indexes of the chain of custody log

...and that is the utxoset.....

it just makes it easy to see, out of the chain of custody log which records are still active and unspent to save readying the whole long file over and over again.

[NeuroticFish]

Would it be less complicated when the system would simply allow me to spend 0.09 btc and receives nothing back?

The current way it the simpler approach. Maybe not as simple to gasp, maybe not as simple for us humans, but it's the more straightforward for the system/computers (tracking the utxo is much more straightforward than keeping the results and making sure they're correct)

And for humans can be easy too (or at least easier) by just thinking of each input as a variably sized banknote. The result of every transaction getting to you is such a banknote.
When you spend, you usually spend a number of such banknotes and get another one as change. The receiver gets a new banknote with a new size = the amount he has to receive.
(If you knew all this, even better).

The result is something that easily allows the system track the amounts and their history very easily.
And the wallet adds up all the utxo from your addresses for convenience and easier reading.

[tbct_mt2]

You can not predict price from UTXO or transaction fee. They are what will go after the price. When you see transaction fee is high, that means there are more demand to move Bitcoin through on chain transactions. Hence, there are more waiting transactions in mempools but network capacity to handle waiting transactions is still the same, increases or falls a little bit.

UTXOs can be from real long term hodlers or from people who lost their Bitcoin.

[NeuroticFish]

UTXOs can be from real long term hodlers or from people who lost their Bitcoin.

Well, long term hodelrs and people who have lost their coins do match the expected pattern: they make the markets have less coins to play with and this can have the effect of increasing the price.