Since crypto’s recent lull, optimistic industry insiders have claimed that cryptocurrency investors, whether from retail or institutional backgrounds, have continued to purchase Bitcoin (BTC) en-masse and on the cheap. Although this sentiment has been nothing more than unconfirmed hearsay, research recently completed by Twitter user ‘FlibFlib’ could indicate that that the aforementioned claims have credence. More specifically, the UTXO set size has seen a slow, but steady rise, even though BTC volatility is nothing more than a distant memory.

You might be thinking: this is all well and good, but what are UTXOs?

What Are UTXOs?

Well, for the uninitiated crypto enthusiasts, Bitcoin uses a system based on inputs and outputs to accurately manage transactions and wallet data. While inputs are self-explanatory, outputs, or unspent transaction outputs (UTXOs) to be more specific, can get a bit complicated for crypto fresh meat, so to speak.

Simply put, it is impossible for the Bitcoin Network to split up outputs into fractions. So, to fix this issue, Satoshi coded in UTXOs, which split up outputs into “spent” and “unspent” values to create a change system, which makes the accounting process easier. But what does this look like in a real-world scenario?

Let’s say Alice receives five BTC in a single transaction, making up all the coins in her wallet. While she may need to only send one BTC to Bob, her wallet will automatically send her full balance, sending one BTC to Bob in a “spent” output, and four back to herself in a newly-created change address — the “unspent” output.

It is important to note that UTXOs aren’t present on all blockchain networks, with Ethereum using the simpler accounting mechanism to calculate a wallet’s balance or transaction amount.

Regardless of your preference of the two systems, UTXOs play a key role in the analysis done by FlibFlib, which surprisingly paints a bullish picture for the cryptocurrency market as a whole.

“Bitcoin Accumulation [Could Be] Well Underway”

As alluded to earlier, FlibFlib, an insightful crypto trader and analyst, recently took to Twitter to express his opinions that the growing number of unspent outputs could indicate that Bitcoin is undergoing an accumulation phase.

In an accompanying image, UTXO and the value of BTC were put beside each other, drawing connections and trying to discern how the two charts relate.

Ive Analyzed Unspent Transaction Output (UTXO) along side $BTC price It rationalizes whats occurring in the market on the assumption that an increase in UTXO means Accumulation and a decrease means Distribution It appears to support the idea that accumulation is well underway pic.twitter.com/suUUXRRoGz — f i l ₿ f i l ₿ (@filbfilb) November 13, 2018

The analyst first explained that a rise in UTXO count indicates that accumulation is occurring, subsequently drawing attention to the “smart money” traders that bought and held BTC en-masse prior to 2017’s bull run.

UTXOs continued to rise drastically until a few weeks after Bitcoin’s $20,000 peak, when the indicator saw a sharp decline in correlation with BTC’s strong move under $10,000, signaling that a substantial number of traders and investors had sold their holdings in a state of panic. In fact, by July, UTXOs had seen a 20% haircut from its all-time high, returning to levels seen before Bitcoin first surpassed $10,000 in November 2017.

However, since July’s year-to-date low, the lesser-known indicator has been on a tear, outperforming BTC by a handful of percentage points. Flib explained: