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Here’s what’s behind this trend
Network data shows that Bitcoin Coin Days Destroyed (CDD) has reached a new all-time high (ATH). Here’s what might be behind this trend.
Bitcoin CDD just saw a bigger increase than November 2018
As pointed out by CryptoQuant community manager Maartunn in a publish on X, BTC CDD has just witnessed a huge surge. O CDD is an on-chain indicator based on the concept of “coin days”.
A coin day is an amount that 1 BTC accumulates after remaining inactive on the blockchain for 1 day. So, when a coin stays in the same wallet for a certain number of days, it gains an equal number of coin days.
When this inactive coin is finally moved on the network, its coin days counter naturally resets to zero, and the coin days it carried before are considered “destroyed.” CDD monitors the number of days worth of coins destroyed on the network on a given day.
Now, here is a chart showing the trend of Bitcoin CDD throughout the history of the cryptocurrency:
Looks like the value of the metric has been quite high in recent days | Source: @JA_Maartun on X
As the chart above shows, Bitcoin’s CDD has just recorded a huge increase, suggesting that transactions on the network have reset many coin days.
Generally, these spikes in the indicator are associated with movements of long-term holders (LTHs). Investors belonging to this group tend to use HODL tokens for long periods, therefore, they naturally accumulate a large number of coin days.
When these resolute hands finally make transactions, these days of accumulated coins are eliminated, causing the metric to reach a high value. Typically, LTHs break silence when they want to sell, so spikes in the indicator could be a potential sign that these diamond hands are participating in a sell-off.
During the last increase in CDD, 518.2 million days worth of coins were destroyed. On the chart, this is notably higher than the all-time high of 397.4 million witnessed during the November 2018 crash.
On the surface, it seems possible that the most inactive LTHs have just made their biggest selling move in history. However, looking a little deeper, it becomes clear that there is a specific reason for this spike in CDD: the Mount Gox Transactions.
The bankrupt cryptocurrency exchange had previously revealed plans to pay creditors, so these latest transfers were likely related to them.
As the Bitcoin stack under the platform’s custody had been inactive for quite some time, it would naturally have accumulated many days’ worth of coins. The movement of these coins meant that a record number of coin days were destroyed in a short space of time.
BTC Price
At the time of writing, Bitcoin is trading around $67,500, down 4% over the past week.
The price of the asset appears to have registered some decline recently | Source: BTCUSD on TradingView
Featured image by Dall-E, CryptoQuant.com, chart by TradingView.com