Run the Numbers #13: Bitcoin HODL Waves

Bitcoin & Data Science


When Bitcoin is sent to an address on the network (including freshly mined Bitcoin sent to the miner’s address), it is stored in an Unspent Transaction Output or UTXO. UTXOs show that there is Bitcoin available to be spent from that address which can be seen and verified by any Node on the network, but can only be spent using the private key. By looking at the age of UTXOs, we can get an idea of the velocity of money in Bitcoin.

Graph from

The graph above shows the age distribution of UTXOs over time (left) with a price overlay (right). The warmer the color, the younger the UTXO is and therefore the higher velocity it has. The longer Bitcoin has existed, the older UTXOs can potentially be. In 2018 Dhruv Bansal, Cofounder & CSO of Unchained Capital, wrote a fantastic piece outlining a concept he called HODL Waves which looks at the UTXO age metadata to make some fascinating observations. HODL Waves attempt to describe large groups of UTXOs held for long periods of time which form in the wake of bull market cycle.

“A common pattern after every rally in Bitcoin’s price is what we have named a “HODL wave.” A HODL wave is created when a large amount of Bitcoin transacts on the way up to and through a local price high, becoming recent BTC (1 day — 1 week old), and then slowly ages into each later band as its new owners HODL. A HODL wave manifests visually on the chart as a pattern of nested curves caused by each age band becoming suddenly much fatter (taller) at progressively later times from the rally. The image below traces a few of the largest HODL waves.” – Dhruv Bansal, Unchained Capital

Source: Unchained Capital

The first three major HODL Waves, pictured above, occurred in 2009 – 10, 2011, and 2014. With each wave the age of the UTXOs gets older, represented by a darker color on the graph. Though some percentage of coins are lost forever through the loss or destruction of hardware or poor private key management, it can be inferred that each HODL wave contains a strong set of Bitcoin holders (aka HODLers) who intend to save their coins for years to come. The more coins that are locked up in this way, the less liquid Bitcoin there is to be traded on the open market. In theory, this should apply upward pressure on the price.

If this trend continues into the future, each time the price spikes higher, there should develop a new wave of long term Bitcoin HODLers, driving the price up yet again. A positive feedback loop. The open nature of Bitcoin allows for this phenomenon to be observed in real time and, assuming Bitcoin’s long term success, will be fascinating to look back on as we have more years of data.