Introducing Whale Alert’s “Average Buy Profit” metrics
Whale Alert has developed new metrics for exploring and leveraging blockchain data, such as the Average Buy Profit (ABP); a powerful series of metrics that provide valuable insight into market participant positions and behavior. At the center of the ABP lies the average buy price at which a blockchain address acquired their token balance. The average buy price is used to generate metrics such as the total potential market profit, total realized profit, realized profit per token, potential profit per token and market profit ratio (ABPR or SOPR+).
The ABP for an address is calculated by subtracting the average asset buy price of the balance of an address from the asset price at the time of a transaction (t). For example, if an address received 2 BTC for $10,000 total, the average buy price per BTC is $5,000. If the address then spends 1.5 BTC and again receives 2 BTC at $60,000 total, the average buy price of the remaining balance is 0.5 * $5,000 + 2 * $60,000 divided by 2.5 = $49,000. If the address then decides to make a transfer at a BTC price of $70,000, the average buy profit (ABP) would be $70,000 — $49,000 = $21,000 per token for that address.
Realized vs. Potential Profit
The ABP can be used to calculate both the realized and the potential profits of an address. Realized profit is generated when an address initializes a transaction and is calculated by multiplying the outgoing amount with the asset price at that specific time. The potential profit for a single address is calculated by multiplying the entire available balance with the current asset price minus the average buy price. The above can be applied to the entire market as well. By adding up the realized profits for every address sending an asset during a specific period of time, you can find the realized profit for the entire market. In similar fashion, by adding up the potential profits for all addresses at a specific time you find the potential profit for the entire market.
Average Buy Profit Ratio (SOPR+)
A very useful metric is the average buy profit ratio (ABPR), which show whether on average assets were sold at a profit or loss during a specific time period. The ABPR is calculated by dividing the asset price (at moment of transfer) by the average buy price for each sending address. The resulting ratio tells whether on average assets were sold at a profit (ratio > 1) or a loss (ratio < 1).
ABPR versus SOPR
The popluar metric Spent Output Profit Ratio (SOPR) uses a unique feature of Bicoin: UTXO’s. Rather than keeping track of balances, Bitcoin uses Unspent transaction outputs (UTXO) per address, which can be received and spent by an address. The ratio is calculated by dividing the value of the UTXO at the time it is spent by the value at the time it was received. A huge downside to using UTXO’s is that an address can spend them in any order, regardless of the price paid for them, which can distort the resulting ratio. This is especially true if the address acquired their assets at widely varying times and thus prices. ABPR solves this by taking into account the average buy price, which is the standard in calculating average profit outside of crypto as well. ABPR can be calculated for any asset on any blockchain, making it a powerful tool for comparing performance and finding correlation between assets.
Whale Alert provides institutional quality data to the entire crypto community in order to provide transaparency and trust to an exciting ecosystem. The Average Buy Profit metrics are just one of the new series of metrics developed by Whale Alert. For more metrics and other cool stuff such as transaction alerts, check out our website whale-alert.io
