4 - Introduction to Supply Dynamics

This tutorial introduces the concept of Bitcoin supply dynamics, as we observe the coin supply throughout the process of minting, HODLing, and changing of ownership.

Introduction to Supply Dynamics

From its inception, the coin supply of the Bitcoin protocol is transparent, and can been verified by anybody running node software. The pre-programmed supply curve is capped at 21 million coins, and has been plotted out below in the Total Circulating Supply metric, which is from data sourced from our internal (glass)node.

The composition of the Bitcoin supply can be further investigated by clustering it into different lifespan sub-groups. Since we can audit the supply, we can also see how long it has been since a coin was last moved on-chain. The chart below presents an example of three supply curves which we can use to investigate investor sentiment and market cycles.

  • Circulating Supply in orange

  • Supply Last Moved 1yr+ Ago in red

  • Supply Younger than 1yr in blue

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Circulating Supply

This metric shows the total number of coins issued since the Bitcoin network inception. These coins are initially issued to miners as a reward for writing a block of transactions into Bitcoin’s ledger. The total supply curve is hard-capped at 21 Million coins. As of Dec-2021, over 90% of the max supply is already in circulation. The last remaining ~2 million coins will take approximately 118 years away to mine, with the last coins expected to be minted in year 2140.

Supply Last Active 1+ Year

This metric presents the proportion of the circulating supply (%) that has not transacted for over one year. This provides insight into Bitcoin accumulation and distribution cycles. As investors accumulate and store coins for long periods of time, this metric will rise as more coins cross the 1yr age threshold. Conversely, as these long-term investors spend and distribute their coins, this metric will decline, and these older coins become young again. This metric will naturally drift higher due to the growing share of coins held for a very long time or lost (loss of access to private keys).

  • Supply Older than 1yr will Increase after a period of investor accumulation, where coins have been transferred to wallets for long-term storage. This metric will increase only after coins are dormant for 1yr, so has a delayed reaction.

  • Supply Older than 1yr will Decrease as longer-term investors spend coin and transfer them to exchanges or other entities. Spent coins will immediately change from 1yr+ to 0-days and thus this metric react straight away.


Reflects the number of newly minted BTC coins that are mined each day (orange). The trace is somewhat volatile due to natural variability in both changing hash-rate on the network, and the number of blocks that are mined per day (and thus coins. Halving events can also be seen, which occur every 210,000 blocks (approx 4yrs), and reduce the number of BTC coins mined per block from 50, to 25, to 12.5, and so-on. A 14-day Simple moving average is shown in blue.

Inflation Rate (%) and Stock-to-Flow Ratio

Resolves the issuance of newly minted BTC coins into an annual rate of supply expansion (orange). Naturally, during the early years where circulating supply is small, the annual inflation rate is very large. However over time, and as halving events occur, the inflation rate perpetually declines, and stabilizes. Stock-to-Flow Ratio (blue) is the inverse of inflation rate, and shows how many years it would take at the current issuance rate to reproduce the circulating supply.

Application: Analysing Bitcoin Market Cycles

Generally speaking, the age of coins tend to follow Bitcoin market cycles:

  • During Bullish markets the supply of old coins tends to deplete. This occurs as longer-term investors spend their coins, and distribute them to incoming new holders.

  • During Bearish markets the supply of old coins tends to increase. This occurs as shorter-term investors exit the market, and gradual accumulation by higher conviction holders begins.

We can observe these cyclical patterns in the Supply Lasy Active 1yr+ metric (red below) which cycles and down approximately in line with Bitcoin market cycles.

The next step is to construct an oscillator showing how much the Supply Last Active 1yr+ metric is increasing (positive) or decreasing (negative). In the tutorial video below, we will explore how we can use Workbench to calculate the Net Position Change Oscillator shown below in blue. This helps is identify macro changes in Bitcoin market cycles.

Video Guide Overview

On-chain analysis allows us to observe the holdings, spending and flow of funds through the network. In this session we will get started with the foundations of supply dynamics for Bitcoin.

Topics for Discussion:

  • Start simple with circulating supply, issuance, inflation.

  • Economic metrics like inflation rates and Stock-to-Flow.

  • Analyse the supply older and younger than 1yr.

  • Introduce the supply Net Position Change concept.

Video Workbench Tutorial

This workbench tutorial provides an introduction to the tool, and shows you how to build your first metrics and assess Bitcoin market cycles using Supply Last Active 1yr+.

Tutorial Workflow:

  • Add base metrics and set correct scales and axes.

  • Convert a Supply from % into BTC Volume.

  • Calculate a new metric ‘Coins Younger than 1yr.

  • Calculate a Supply Net Position Change metric using the diff function.

View Live Workbench Chart

Glassnode Advanced - Supply Dynamics Metrics

These supply dynamics metrics are just scratching the surface. With a Glassnode Advanced plan, we can start investigating the age of the coin supply as a measure of investor sentiment and conviction, with a particular focus on the longer-term cohorts. Some example Advanced metrics include:

  • Wrapped Bitcoin Balance (WBTC) Shows us the volume of coins deployed onto Ethereum for DeFi applications.

  • 90-day Coindays Destroyed captures the cyclical behaviour of older coins spending as long-term investors take profits, typically in bull cycles.

  • Net Realized Profit/Loss allows us to see the magnitude of gains and losses realized by coins spent each day. It often spikes during high volatility events such as bull market peaks, and bear market capitulations

  • The Accumulation Trend Score is calculated by from observing whether the on-chain balance of a wide cross-section of the market has increased (cool colors), or not (warm colors).

  • HODL Waves breaks up the coin supply into age brackets. We can use this metric to observe accumulation and distribution cycles.

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