Are you interested in learning more about how to use Holders’ Composition by Time Held to inform your crypto investments? If so, you’ve come to the right place. In this blog post, we’ll explore how this metric, found in the Token Summary section of The Crypto App’s Pro or Pro+ offering, can help you evaluate the potential of a crypto asset and make more informed investment decisions.
What is Holders’ Composition by Time Held?
Holders’ Composition by Time Held is a metric powered by IntoTheBlock that shows a crypto-asset’s ownership distribution by time held. All of the addresses holding the asset are classified into one of three categories:
Hodlers: Addresses that have held the asset over a period of one year. These are seen as long-term investors.
Cruisers: Addresses with holding periods between one and twelve months. These are mid-term or so-called swing traders.
Traders: The group that has held the asset for less than one month. These are short-term speculators.
By categorizing addresses based on their holding period, this metric can help you better understand the behavior and sentiment of investors in a particular crypto asset.
How Can I Use This Metric?
Understanding the Holder’s Composition by Time Held for a particular crypto asset is important when making investment decisions. It provides valuable insights into the asset’s maturity level and market perception of its fundamental utility and speculative value.
Here are some ways you can use this metric:
Identify Early-Stage Crypto Assets: An asset that is primarily held by traders can indicate that it’s still early in its adoption curve and hasn’t found its market fit yet. It may be subject to higher levels of speculation and volatility, making it a better fit for short-term traders rather than long-term investors.
Spot Promising Crypto Assets: Conversely, an asset that is predominantly held by hodlers can signal that it has gained traction around fundamental use-cases, justifying longer-term investment by the greater markets. Identifying assets with a high proportion of hodlers can be a promising sign for investors looking for longer-term gains.
Assess Risk vs. Reward: Understanding the distribution of holders by time held can also help investors assess the risk versus reward of investing in a particular asset. An asset with a high proportion of short-term traders may offer high potential gains but also carry higher risk due to greater volatility. An asset with a higher proportion of long-term hodlers may offer more stable returns but with potentially lower upside.
Ultimately, the Holder’s Composition by Time Held can provide valuable insights into the evolution of a crypto asset over time. For instance, Ethereum’s historical data shows a shift in its holder’s composition, reflecting the asset’s evolution from a speculative instrument to a center of gravity around the fundamental adoption of decentralized applications.
In 2017, Ethereum was primarily used for speculative purposes, with most of its holders categorized as traders or cruisers. However, in 2019, about a year after the launch of its decentralized applications, the composition of its holders shifted towards hodlers. This suggests that the growing adoption of decentralized applications played a key role in attracting longer-term investors.
While some argue that the growth of hodlers is due to lost wallets, the sustained growth of hodlers in Bitcoin and Ether, in particular, suggests otherwise. Other crypto assets such as Litecoin and Dogecoin have actually seen a decrease in hodlers throughout 2021.
Knowing the composition of the addresses by time held for a crypto asset you are looking to invest into may change the approach you take towards it as an investor or trader. Make sure you’re fully informed before you make your next crypto trade; start your 7-day free trial to The Crypto App’s Pro or Pro+ offering today.
