Yeah, it works on the logic that most transactions are in round dollar amounts, like $50, $100, etc, so there's an extra density of transaction outputs at those round amounts. By looking at where these peaks in the transaction outputs distribution are, you can estimate what the price would have been to make those sat amounts equal to round dollar amounts.
I think it's a really cool idea, especially because you don't need to pull the price from any external data provider.
People buying $50 on an exchange wouldn't send it to their personal wallet until they have a larger UTXO wouldn't they?
Then there's all the ordinal noise & people buying lightning on robosats.
reply
That's what I don't understand as well. If you buy $50 on Coinbase, I highly, highly doubt that Coinbase is doing an on-chain transaction for that amount to move it into your "own" wallet on Coinbase. Rather they are using their centralized ledger to keep track of who has what and then settling accordingly when you choose to withdraw.
I wonder where the data for the UTXO sets is coming from. Batched withdraws from exchanges? As more and more btc comes off exchanges, I wonder how this price estimation model will continue to function.
reply
Coinbase definitely don't do that until you withdraw
reply