Despite Bitcoin’s meteoric surge of over 550% this year, on-chain analysis paints a picture that it is still early in the game. Why? Three words: Coin Days Destroyed (CDD).
Nowhere near the top this year
By evaluating the CDD, we can visualize the confidence that long-term Bitcoin holders have in terms of the current Bitcoin price.
Let’s start with coin days to understand how CDD works.
What is a coin day?
Coin days are the number of days since a bitcoin was moved from one wallet to another. The logic behind this is to assign a higher value to an unused coin. Why? Because long-term Bitcoin holders know better the volatility of the market cycle and are therefore better able to determine the best time to buy or sell.
When long-term owners sell their bitcoin, the coin days destroyed will rise higher. When strong hands hold, CDD trends decline, indicating their confidence in a new bull market.
What are mint days destroyed?
Coin Days Destroyed is a term used to describe Bitcoin that was in a wallet and has accumulated coin days suddenly being sold, thereby “destroying” those coin days. It is important that Bitcoin is not actually destroyed. CDD is simply a terminology that calculates the time erased.
Here’s an example: imagine an investor buys 1 bitcoin and keeps it in their wallet for 90 days. Then the price rises sharply and he decides to sell. He would have “destroyed” 90 Bitcoin days.
As investors pile up (and few old coins are issued) the broken coin days will trend downward. While late stage Bull markets, old coins are often increasingly issued and lead to an increase in the number of destroyed coin days.
The nice thing about this formula: It weighs Fewer on the activity of short-term traders. Since these traders don’t hold up Bitcoin for long, their impact on Coin Days Destroyed is minimal compared to the activities of long-term traders.
However, when long-term owners start selling their Bitcoin, it is worth paying attention to.
If we look at these key metrics, it seems that Bitcoin has nowhere near peaked this year. Bitcoin is now over $ 40,000, but the 90-day moving average for Coin Days Destroyed is near its lowest level. See the table below:
The decline in the number of destroyed coin days shows that old hands are stronger than ever in the face of the rise in prices.
How is CDD calculated?
Coin Days Destroyed is calculated by:
- The number of Bitcoin in a transaction
- Multiply by the number of days since these coins were last spent.
The “destroyed” part will take effect if it is removed upon receipt. This in turn means that the coins that are kept for a longer period of time have more weight with CDD.
This metric on the chain shows the weight of the strong hands compared to the short-term speculators.
The current number of coin days destroyed is well below the 2017 peak, so this shows that fewer veteran hands are being sold than in previous bull cycles.
Given that the Bitcoin network is now 12 years old and the current BTC supply has already increased, it is telling that strong hands are not selling their holdings. This suggests that the top of the market is nowhere near our current price.
In addition, increased demand from institutional investors could be the main driver of this recent surge in long-term veterans’ confidence.
In April, Fidelity Investments, with assets under management of $ 10.3 trillion, launched an analytics platform called “Sherlock” that is capable of visualizing Bitcoin data for its institutional clients in the chain. Wells Fargo is also preparing for Bitcoin investments as it announces it will offer an actively managed cryptocurrency product.
These steps by well-known asset managers underscore the rise of institutional investors who are betting on the future growth of Bitcoin.
This is a guest post from Portfolio Insider. The opinions expressed are solely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.