The current Bitcoin cycle might be its “most challenging” one yet if the drawdown in this on-chain metric is anything to go by.

Total Amount Held By 1k-10k BTC Value Band Has Sharply Gone Down Recently

As pointed out by an analyst in a CryptoQuant post, the latest drawdown in the holdings of the 1k-10k BTC value band is the most drastic in the history of the crypto. The relevant indicator here is the “UTXO Value Bands,” which tells us the total amount of coins each value band is holding in the market.

UTXOs are divided into these “value bands” or groups based on their current value. For instance, the 100-1k BTC value band includes all UTXOs carrying between 100 and 1,000 coins. Here, the relevant UTXO value band is the 1k-10k BTC range, a historically important cohort as usually only the whales have wallets with UTXO amounts so large.

Now, the below chart displays the trend in the total holdings of this value band over the last five years:

Looks like the value of the metric has rapidly declined in recent months | Source: CryptoQuant

The graph shows that the total number of coins held by this Bitcoin UTXO value band has seen a sharp drop this year. In all, the drawdown has amounted to 453,205.04 BTC being dumped by this cohort since the peak observed in June 2022.

For comparison, in the 2018/19 bear market, the 1k-10k BTC value band saw a total drawdown of 324,868.65 BTC from the high. During the COVID black swan crash of 2020, the group also distributed a significant amount, shedding 186,928.48 from its holdings.

And in the bull run during the first half of last year, these whales reduced their holdings by 407,457.14 BTC between the peak in February and the July bottom. The latest drawdown in the metric’s value is the sharpest that Bitcoin has seen yet. Because of this fact, the quant exclaims the current cycle to be the “most challenging” one in the history of the asset so far.

An interesting pattern can also be seen in the chart; whenever the 1k-10k BTC has finished with the distribution and started accumulating again, Bitcoin has felt a bullish impact. “Generally, the market can only recover when this cohort has enough confidence to accumulate again,” explains the analyst. “And at the moment, we still not get any positive signals from this cohort.”

BTC Price

At the time of writing, Bitcoin’s price floats around $16,600, down 1% in the last week.

BTC seems to have gone down during the past day | Source: BTCUSD on TradingView

Featured image from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Recently, FinTech startup COTI Group, the issuer of algorithmic stablecoin Djed (which is built on Cardano), shared with the Cardano community some important details about the current status of the project.

What Is Djed ($DJED)?

On 26 September 2021, day two of the two-day Cardano Summit 2021, IO Global (IOG), the blockchain technology firm responsible for the research and development of Cardano ($ADA), and FinTech startup COTI Group, unveiled Djed, a formally verified crypto-backed pegged algorithmic stablecoin for Cardano that was designed by the former and is issued by the latter.

Djed’s use of smart contracts ensures price stabilization. Djed can be useful in decentralized finance (DeFi). It works by “keeping a reserve of base coins, and minting and burning stablecoins and reserve coins.”

The following is the abstract from IOG’s white paper (released on 17 August 2021) for Djed:

“This paper describes Djed, an algorithmic stablecoin protocol that behaves like an autonomous bank that buys and sells stablecoins for a price in a range that is pegged to a target price. It is crypto-backed in the sense that the bank keeps a volatile cryptocurrency in its reserve. The reserve is used to buy stablecoins from users that want to sell them. And revenue from sales of stablecoins to users are stored in the reserve. Besides stablecoins, the bank also trades reservecoins in order to capitalize itself and maintain a reserve ratio significantly greater than one.

“To the best of our knowledge, this is the first stablecoin protocol where stability claims are precisely and mathematically stated and proven. Furthermore, the claims and their proofs are formally verified using two different techniques: bounded model checking, to exhaustively search for counter-examples to the claims; and interactive theorem proving, to build rigorous formal proofs using a proof assistant with automated theorem proving features.“

In a blog post published on 26 September 2021, IOG said that Djed “operates by maintaining a reserve of base coins, while minting and burning various other stable assets and reserve coins” and that “it is designed to be used for paying transaction fees on the Cardano network,” which helps to “make transaction costs more predictable, so avoiding volatile and exorbitant gas fees for users.”

The COTI team believes that “stablecoins are a ‘killer app’ that will be adopted by a large number of crypto users for settling payments and covering fees.”

Shahaf Bar-Geffen, the CEO of COTI Group, had this to say:

“The stablecoin ecosystem has matured tremendously over the past few years. Blockchain participants are using stablecoins to engage in everyday transactions because they allow monetary value to be exchanged in a seamless manner, regardless of the sender and recipient’s location. I believe that adding the Djed stablecoin to the Cardano blockchain will significantly improve how transactions are settled on the platform.“

And IOG Co-Founder and CEO Charles Hoskinson stated:

“The Djed stablecoin could be a game-changer in the crypto space, appealing to an entirely new audience at a time when the industry is already experiencing astronomical growth. Djed shares our commitment to formal verification, proving a robust method of combating price volatility of crypto markets.

“COTI has been a long-time partner of the Cardano ecosystem. It’s great to have them on board with this new venture.“

Also, on 26 September 2021, COTI published a blog post (titled: “Why Being the Issuer of Djed, Cardano’s Official Stablecoin, is a Game Changer for COTI”), which had this to say:

“Djed isn’t just a stablecoin built upon Cardano’s chain, it is also designed to become the ultimate coin with which Cardano’s entire network transaction fees will be paid. It makes more sense for a chain to have predictability in how much transaction costs, rather than have volatile gas fees, and Djed will do just that…

“While our main goal is to issue stablecoin for enterprises and merchants on COTI’s Trustchain, we also plan on being involved with stablecoin issued on other chains. Our long relationship with Cardano, leading to an equity investment by their ecosystem fund, has created the opportunity for COTI to become the official issuer for Djed, Cardano’s stablecoin.

“As part of COTI’s role, COTI is in charge of developing the user interface system and will operate the integration between users to the smart contracts for the stablecoin. COTI will partner with enterprises, developers, and others parties who wish to mint both the stablecoin and the reserve coin used as part of the pegging algorithm.

“$DJED and its reserve coin’s mint and burn fees will be charged in $ADA and will be entered into the equity pool of the protocol. The reserve coin holders get a share of this pool as an incentive for their participation in maintaining the $DJED peg ratio.

“As the provider of this service, users will be subject to operating fees that will be paid in $ADA and deducted from the initial deposit and operational costs. We plan on converting such $ADA fees to $COTI coins, initially by buying $COTI directly in the market and supporting the demand for $COTI, then by depositing such $COTI in COTI’s Treasury, for the benefit of the Treasury users. It’s a real win-win and a great opportunity for the COTI ecosystem.“

Djed’s Current Status

On 29 September 2021, COTI published a blog post (titled: “The Latest Djed Updates”) that provided the following breakdown of Djed development activity over the past few weeks:

“Extensive script optimizations to increase throughput have been carried out, which helped to cut down more than 60% of the execution budget (fees)… The $ADA exchange rate acquisition module has been updated to consider at least 6 external sources for redundancy and security reasons. The exchange rate will be updated on the blockchain only when 3 out of the 6 external sources have responded reasonably... The on-chain code has been finalized with reference to audit mediations and we are now waiting for the final audit report.“

COTI also announced four new partnerships:

WingRiders, an automated market maker DEX built on top of Cardano… JaraNetwork, an Open Finance Portal… Cardano Warriors, a Massive Multiplayer Onchain Role-Playing Game built on Cardano… Cogito Protocol, a spin-off from SingularityNET, a multichain, decentralized AI platform.

As for what lies ahead,COTI said:

“The off-chain code and specific libraries to synchronize and converse with cardano-node are currently being updated to properly handle Cardano node version 1.35.x on the private testnet environment. Since some changes in the PAB occurred, there’s a need to update the proxy and the UI accordingly.

“After implementing all the updates, a test run will be carried out to ascertain that everything works as expected. Once the test run is completed, it’ll be deployed to public testnet. We are waiting for the final audit results to see if any critical issues are discovered. If there are no issues, we will go ahead to deploy on mainnet.“