Glassnode is one of the leading on-chain data companies in the Bitcoin ecosystem, converting blockchain data into 250 metrics of actionable information for its customers. These cover everything from the inflows and outflows of the exchange to the activity of the bitcoin whales.
But in 2012 the CTO and co-founder of Glassnode, Rafael Schultze-Kraft, had never heard of Bitcoin. As a budding neuroscientist, he was busy connecting human brains to computers.
In one experiment, every time a participant thought of raising their left or right hand, they moved a “hungry cowboy” in a video game for the sole purpose of eating fruit.
Taking brain waves and turning them into simple commands is a challenge. The brain is so complex that it takes strong math skills to interpret it. However, despite his growing abilities, Schultze-Kraft was frustrated with how little we learn about the brain. Six years later he stopped studying the brain; Instead, he focused on Bitcoin. And he didn’t look back.
“The Bitcoin blockchain is much, much easier to understand. The design is beautiful, it’s simple, ”said Schultze-Kraft Decryptand added, “The brain is a whole different galaxy when and when we get there. They understand parts of the brain, but not the global perspective. “
While Bitcoin and the brain seem to be a world of their own, trying to understand them requires the same basic methodology.
“When you use data, the key is to better understand how it works, be it the blockchain, a company, or the brain. They use data to make sense of it, extract value, and gain insight. These are things that I do and that were equal back then, ”he said.
Schultze-Kraft, who was born in Colombia, first heard of Bitcoin in 2013 – but was unable to pursue it. In 2016 he lived in Berlin and was looking for investment opportunities. His ex-colleague pointed out Bitcoin and Ethereum to him. That year, as a data scientist, he got to know some Swiss cryptocurrency investors and realized that he could apply his techniques to the blockchain.
He founded Glassnode in April 2018 with two other co-founders. The original idea was to get a bird’s eye view of the crypto landscape, scrape Twitter’s sentiment analysis, check out the latest news articles, and hook up with all the exchanges. However, the team quickly decided on a narrower focus: you would study the blockchain yourself.
Schultze-Kraft explains that blockchain data poses two main challenges. First, it’s very expensive to set up infrastructure, run nodes, and get all of the data on a regular basis. Second, it is difficult to turn off the noise. For example, if an exchange moves their cold wallet storage it looks like a major event where a lot of Bitcoin was moved, but in reality it was a much lesser affair.
Now Glassnode offers 259 metrics, from observing how whales accumulate bitcoin to studying the amount of bitcoin being directed to and from exchanges. As co-founder and CTO, Schultze-Kraft spends the day handling customer meetings and delving into the data himself. Because he’s so familiar with what goes on in Bitcoin at the blockchain level, he also has a unique perspective on what’s really going on.
Key insights into Bitcoin’s blockchain
There are three main pieces of data in the chain that Schultze-Kraft examines to understand the current Bitcoin market and where it could lead in the future.
Data exchange comes first. He pointed to the rapidly decreasing amount of Bitcoin on the exchanges, which is leading to a supply crisis.
“I think that’s extremely optimistic about the price of Bitcoin. Something that we keep a very close eye on, ”he said.
But where is all of the bitcoin going? He argued that it is likely going into cold wallets where Bitcoin is kept long-term. He noted that Coinbase’s reserves have decreased significantly, possibly due to MicroStrategy buying $ 425 million in Bitcoin.
“In the months leading up to this announcement, you can see this huge drop in reserves on Coinbase. Often with significant drops of over 8,000 Bitcoin. Overall, Coinbase’s reserves went down by 80,000 Bitcoin in the summer, ”said Schultze-Kraft.
The second element that strikes him is a set of market indicators that can be used to identify the long-term market cycles. He referred to the unrealized net result, the reserve risk and the MVRV-Z-Score.
“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. It’s very bullish. There is so much upside potential that these indicators are showing. We are only at the beginning of this bull market, ”he said.
Third, he studies the behavior of long-term owners. He noticed that older coins move more often.
“Now you could say this is bearish, these are essentially Hodlers starting to sell, but that’s just smart money,” he said, adding, “Every time we see this move, long-term supply goes down to Hodlers, they may start taking profits, is just a sign of a bull market. “
He also said the Bitcoin blockchain is becoming more active. There are more addresses, more active addresses, and more active entities. All of this suggests that more users are looking at the Bitcoin blockchain itself.
And for Schultze-Kraft these are just more data to drive the Glassnode motors.