On-chain Price Interferometry
The UTXOracle project introduced a method for detecting the USD price of Bitcoin directly from on-chain data. This talk suggests we call this new discipline "on-chain price interferometry.” The idea is simple. To measure the declining purchasing power of the dollar, we can look at the average checkout amount at the grocery store. Over large sample sizes, supply and demand fluctuations average out, revealing the underlying depreciation of the currency itself. Now imagine the reverse: average checkout amounts that shrink over time. That pattern would indicate a currency gaining purchasing power. This is exactly what we observe with Bitcoin transactions on-chain. As Bitcoin’s purchasing power has risen, the average output amount has fallen because each transaction behaves like a checkout in a store. The relationship is so consistent that one can estimate the USD price of Bitcoin purely from the average output amount. From there, the estimate can be refined further: clusters of outputs form around round USD values such as $50 and $100. If we know how much Bitcoin corresponds to $100 in a transaction, we know the price used in that transaction. This talk will walk through how the method works, the results it has achieved so far, and the broader implications of having a reliable, purely on-chain measure of purchasing power.
