HODL Waves chart shows age distribution of the entire Bitcoin supply (UTXO set) at any given point in time. I.e. the more BTC value is
held in coins of a given age band the bigger is its proportion in the whole coin set (the thicker is the wave of that specific color)
If you look closely at the chart you will notice that a spike/wave in a smaller age band propagates to upper band waves as corresponding coins age over time.
While it takes time for younger coins to mature up the age bands, a drop to 0 age happens immediately as soon as older coins are spent on the market. Such spent coins start to contribute to the lowest age color band. This process can manifest in "cliff-edge" drops in the upper bands if big coin quantities are getting spent at once.
The chart clearly shows periods when younger coins start to dominate the market and these are generally good times to look for an exit from a position.
In fact it shows exactly that selling process. The *smart money* (older coin holders) selling to the general crowd into price strength until a price blow-off top happens and re-accumulation by the smart money begins anew.
The metric was introduced by Dhruv Bansal in this article.
If you look closely at the chart you will notice that a spike/wave in a smaller age band propagates to upper band waves as corresponding coins age over time.
While it takes time for younger coins to mature up the age bands, a drop to 0 age happens immediately as soon as older coins are spent on the market. Such spent coins start to contribute to the lowest age color band. This process can manifest in "cliff-edge" drops in the upper bands if big coin quantities are getting spent at once.
The chart clearly shows periods when younger coins start to dominate the market and these are generally good times to look for an exit from a position.
In fact it shows exactly that selling process. The *smart money* (older coin holders) selling to the general crowd into price strength until a price blow-off top happens and re-accumulation by the smart money begins anew.
The metric was introduced by Dhruv Bansal in this article.