On-chain data shows the Bitcoin Binary Coin Days Destroyed (CDD) has stayed low recently. Here’s what this says about the current market.
Bitcoin Binary CDD Has Remained At Very Low Levels Recently
According to data from the on-chain analytics firm Glassnode, this indicator attained high values during the 2021 bull run. To understand the CDD metric, the concept of “coin days” needs to be looked at first.
Whenever 1 BTC stays stationary on the blockchain for 1 day, it accumulates 1 “coin day.” If a coin that has remained unmoved on the network for a while, meaning that it has accumulated a certain number of coin days, is now suddenly transferred, its coin days counter would naturally reset back to zero.
The coin days it had previously been carrying are said to be “destroyed.” The CDD indicator measures the total number of coin days being reset throughout the network on any given day.
When this indicator has a high value, it implies that a large number of coin days are being reset in the market currently. Generally, this kind of trend is a sign of movement from the “long-term holders” (LTHs).
This group includes investors that have been holding their BTC since at least 155 days ago, so these holders tend to accumulate large numbers of coin days. Because of this reason, whenever they make transfers, the CDD registers a spike.
In the context of the current discussion, the CDD itself isn’t of interest, but a modified version of it called the Binary CDD is. This indicator basically tells us how the CDD currently compares with the historical average value of the metric.
As is already obvious from its name, this indicator can only attain two values: 0 and 1. It has a value of 0 if the CDD is below the historical average, while it’s 1 when the metric is above it.
Now, here is a chart that shows the trend in the 7-day average Bitcoin Binary CDD over the last few years:
The value of the metric seems to have been low in recent days | Source: Glassnode on Twitter
As shown in the above graph, the 7-day average Bitcoin Binary CDD has had a pretty low value for a while now. This suggests that there hasn’t been any significant destruction of coin days in the market recently.
Naturally, this means that the LTHs haven’t been making any moves out of the ordinary, despite the price observing a notable increase during the last few months.
The LTHs are generally the most resolute bunch in the market, so transfers from them can have significant implications for the sector since they are a sign that even these holders may have been forced to sell.
The Bitcoin bull run during the first half of 2021 saw the 7-day average Binary CDD stay near 1, implying that the LTHs had been selling in full force. As this hasn’t been the case in the rally so far, it appears that the current profits aren’t enough to move these diamond hands, and they are likely expecting better opportunities later on.
These investors continuing to hold such a bullish conviction can be constructive for the price in the long term.
At the time of writing, Bitcoin is trading around $27,300, down 1% in the last week.
The asset continues to consolidate | Source: BTCUSD on TradingView
Featured image from Jievani Weerasinghe on Unsplash.com, charts from TradingView.com, Glassnode.com