3.2 Stakeholder Psychology

DCR holders are free to opt-out and sell their coins into the market at any time when coins are not bound in tickets. Thus, all ticket purchases carry an underlying assumption, that the individual believes the ticket price plus PoS block reward will be more valuable in the future than today.

In other words, if a holder believes obtaining the PoS block reward is not worth the volatility risk, they are better off holding liquid DCR coins or to move to sell them, rather than take on risk for a pseudo-random period of time.

This is a very different mechanism to Bitcoin holders who will typically send BTC coins they believe are undervalued into deep cold storage. The team at Coinmetrics developed the Realised Price to quantify this behaviour by measuring the value of each UTXO, priced at the time it last moved. It thus represents an aggregate view on the market cost-basis for BTC coins, and a lower bound on what long-term holders believe the Bitcoin network is worth (the value users have ‘saved’ in BTC).

For Decred, the realised price is more closely correlated with market value as it is influenced by the continual flow of DCR in tickets. Thus, this metric does not adhere to the same set of assumptions and instead has shown to be a point of market support and resistance in bull and bear markets respectively.

3.3 Stakeholder Commitments

Rational market actors are more likely to sell DCR they believe is overvalued, rather than buy tickets and take on volatility risk. By taking a cumulative sum of all DCR bound in tickets, priced at the time of purchase, we can establish a measure of stakeholder ‘commitment’ to the Decred chain. This represents the aggregate dollar value locked in tickets.

To date, Decred stakeholders have committed over $5.6 Billion in value to the chain in ticket purchases, approximately 38x the market cap of the entire network at the time of writing. Price in BTC, this equates to 1M BTC in value purchased in tickets, two orders of magnitude greater than network value and cumulative rewards paid denominated in BTC.

Interestingly, these psychological stakeholder commitment lines have acted as points of logarithmic price resistance during the 2017 bull trend.

During bullish trends, demand for DCR accumulation and tickets increase, leading to an acceleration of the cumulative ticket value line. As DCR coins approach or exceed the market’s aggregate belief of ‘fair price’, holders will favor liquid coins or, selling for profit leading to overhead resistance. As prices plateau or fall and ticket demand decreases, the cumulative value line in logarithmic space will plateau.

Conversely, PoW miners, who’s cost basis is USD denominated, cannot be expected to commit more hash-power investment than is allowed for in the USD denominated block reward. The cumulative miner USD income line has thus shown to be a level of fundamental support during bearish trends.

It remains to be seen if this psychological reaction lines attain further validity through additional bull/bear cycles.