Glassnode is one of the leading chain data companies in the Bitcoin ecosystem, turning blockchain data into 250 metrics of executable information for its clients. These include everything from the inflows and outflows of exchanges to Bitcoin whaling activity.
But back in 2012, CTO Glassnode and his co-founder Rafael Schultze-Kraft had never even heard of Bitcoin. As a budding neuroscientist, he was busy plugging people’s brains into computers.
In one experiment, every time a participant thought of raising their left or right hand, he would move a “Hungry Cowboy” in a video game, with the sole purpose of eating fruit.
Taking brain waves and turning them into simple commands is challenging. The brain is so complex that it takes strong mathematical skills to interpret it. Despite its growing skill set, however, Schultze-Kraft grew frustrated with how little we learned about the brain. Six years later, he was no longer studying the brain; instead it focused on Bitcoin. And he hasn’t looked back.
“The Bitcoin blockchain is much, much easier to understand. Its design is beautiful, it’s simple, ”says Schultze-Kraft Decrypt, adding, “The brain is a whole other galaxy, if and when we get there. You understand parts of the brain but not the global scene. ”
While Bitcoin and the brain may seem a separate world, trying to understand them takes the same basic methodology.
“If you’re using data, it’s about getting a better understanding of the work, whether it’s the blockchain, company or the brain. You use data to make sense of it, extract value, extract insights; that’s what I do and they correspond back then, ”he said.
Construction of Glassnode
Born in Colombia, Schultze-Kraft first heard about Bitcoin in 2013 – but failed to follow up on it. In 2016, he was living in Berlin, looking for investment opportunities, and his former colleague pointed him toward Bitcoin and Ethereum. That year, he met some Swiss cryptocurrency investors, while working as a data scientist, who realized he could apply his techniques to the blockchain.
Glassnode started in April 2018 with two other co-founders. The initial idea was to take a bird’s eye view of the crypto landscape, grab a sentiment analysis from Twitter, check the latest news articles and plug in all the exchanges. But the team quickly decided on a narrower focus: they would study the blockchain itself.
Schultze-Kraft explains that there are two main challenges with blockchain data. First, it is very expensive in terms of setting up infrastructure, running goals, and accessing all the data on a regular basis. Second, it is difficult to cut out the noise – for example, if an exchange is moving its cold wallet store, this would look like a big event where a lot of Bitcoin had been moved, but it was actually a relationship much less.
Now Glassnode offers 259 metrics, from watching whales build up Bitcoin, to exploring how much Bitcoin goes to and from exchanges. As co-founder and CTO, Schultze-Kraft’s day is spent mixing between handling client meetings and diving into the data itself. Because he is so familiar with what is happening on Bitcoin at the blockchain level, he also has a unique perspective to what is actually happening.
Key insights into Bitcoin blockchain
Schultze-Kraft looks at three major pieces of data on the chain to understand the current Bitcoin market and where it might be heading in the future.
First up is exchange data. He highlighted the rapidly declining amount of Bitcoin held on exchanges, leading to a supply crisis.
“I think this is extremely bullish on the price of Bitcoin. Something we keep our eyes on very closely, ”he said.
But where does all the Bitcoin go? He argued that it is likely to enter cold wallets, where Bitcoin is stored for the long term. He noted that Coinbase’s reserves have declined significantly, which may be because it has facilitated MicroStrategy’s $ 425 million purchase of Bitcoin.
“You can see that in the months leading up to that announcement, on Coinbase you will see that huge drop in reserves. Often with significant drops of over 8,000 Bitcoin. In total, over the summer, Coinbase reserves fell by 80,000 Bitcoin, ”said Schultze-Kraft.
The second element that catches his eye is a range of market indicators that help identify long-term market cycles. He referred to the unrealized net profit / loss, contingency risk and MVRV-Z rating.
“These are global market indicators that show these global cycles, but they are nowhere near the top and the price is at an all-time high. That’s very bullish. It’s as much upside down as those indicators show. We are only at the start of this bull market, ”he said.
Third, it looks at the behavior of long-term occupants. He noticed that older coins were starting to move more often.
“Now you could say this is bearish, basically those hodlers out there are starting to sell but that’s just smart money,” he said, adding, “Every time we see the this move, the long-term hodler supply is down, they are possibly starting to take a profit, that’s just a sign of a bull market. ”
He also said that the Bitcoin blockchain is becoming more active. There are more addresses, more active addresses and more active entities. All of this points to more users taking part in the Bitcoin blockchain itself.
And for Schultze-Kraft, that’s a little more data to fuel Glassnode engines.