From Data Science Team, Glassnode
In our ongoing mission to push the boundaries of on‑chain analytics, we are excited to announce the expansion of Cost Basis Distribution (CBD) coverage beyond Bitcoin – now incorporating Ethereum (ETH), ERC‑20 tokens, and SPL tokens.
This marks a significant leap in visibility over how investors position themselves across multiple asset classes – shedding light on market conviction, capitulation, and the evolving cost basis of investors.
Below, we revisit what CBD is, why it is such a powerful analytical framework, and how these newly released datasets can deepen your understanding of on‑chain dynamics for a variety of assets.
Recap: What is the Cost Basis Distribution (CBD)?
Cost Basis Distribution maps out at what price levels the current supply of a given asset was last transacted on‑chain. In simpler terms, it shows how many tokens (the supply) changed hands at each price point throughout history, overlaying that information with the current market price.
- Investor Positioning and Market Structure: CBD captures investor behavior, revealing how many coins have a ‘cost basis’ around each price level. By doing so, it provides a transparent view of where key support/resistance clusters might form.
- Confidence and Capitulation: CBD can help identify when investors are accumulating coins on the way up (increasing cost basis), or averaging down when prices slide (decreasing cost basis). Such patterns can highlight confidence (buying despite lower prices) or capitulation (when we see drastic changes in supply at certain price level).
💡Our Heatmap Dashboard now provides in-depth insights across hundreds of tokens. Access it here.
Reading the CBD Heatmaps
The CBD Heatmaps are your key to understanding where and when investors are positioned in the market. Here's how to understand the data:
- Color Intensity (Supply Distribution): The color scale – from cooler shades (lower supply) to warmer shades (higher supply) – shows where the token supply is concentrated. A red “band” signals high supply at that particular price range. A green or blue band indicates lesser supply.
- Vertical Axis (Cost Basis): Each “horizontal slice” corresponds to a price range at which some portion of the token supply last moved.
Example below: In October 2024, there was a significant accumulation of Bitcoin between $60K and $65K, represented by deep orange shades indicating a high supply concentration. As the price began rising in November, these shades gradually shifted from orange to yellow and then to green, signaling that investors who purchased at $65K were taking profits and distributing their holdings as the price moved upward.
Fading color intensity showing distribution from investors bought at $65K
- Cost Basis Lines: Cost basis lines represent how much, on average, investors have paid for their holdings over time. When these “stair-step” lines move up, it generally indicates that market participants are buying an asset as prices rise, thereby increasing their average cost basis. This often signals strong conviction or a belief that the asset is not yet overpriced - investors are willing to keep accumulating despite higher prices. See the Bitcoin example below:
The cost basis lines moving up show investor conviction
Conversely, when the lines move down, it means that investors are buying while prices decline, effectively lowering their average purchase price. This behavior can reflect a “buy-the-dip” or DCA mindset: market participants see value in adding to their positions even as the market moves lower, suggesting they believe the asset remains fundamentally strong or undervalued. See the example below with Maker:
Cost basis trending down over time suggests investors buying the dip
Why This Framework Matters and How to Use It
Cost basis behavior offers a window into the collective mindset of investors, showing how they adjust and reaffirm their convictions as the market moves. Tracking these upward and downward shifts helps us understand not only the sentiment behind buying and selling decisions, but also potential inflection points, where the market might pivot.
Here are specific use cases that make this framework a powerful and versatile tool in an investor's toolkit - now applicable across assets at different points on the risk spectrum.
Gauging Investor Sentiment
Changes in cost basis help illustrate broader market psychology. A rising cost basis during a rally often signals optimism; if investors continue buying despite higher prices, it underscores confidence in the asset.
Assessing Conviction
When you see investors continuously lowering their cost basis on a declining price trend, it suggests a high level of conviction; they are willing to commit additional capital despite short-term negative price action. Conversely, if cost basis stays flat or does not increase significantly during a price uptrend, it can indicate a more cautious stance from the market.
Risk Management
For traders and analysts, monitoring cost basis can help gauge where the bulk of the market sits in terms of unrealized gains or losses. Knowing whether most investors are “in profit” or “underwater” can inform decisions about potential selling pressure or accumulation points.
Access the Data via API
We’ve made these expanded datasets easily available through the Glassnode API, allowing you to integrate Cost Basis Distribution directly into your own research platforms and dashboards. Whether you prefer Python, R, or building a web application, direct API access ensures data timeliness and flexibility.
Stay Tuned for More CBD Updates!
In the next article, we will showcase practical examples of metrics built directly from the raw CBD data. You’ll see how to craft visualizations and create proprietary indicators that speak to your specific trading or investment thesis.
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