This metric shows who has been selling Bitcoin in the recent bear market relief rally

Measuring the economic activity of a market requires looking at more than total trading volume, especially when it comes to a specific asset like Bitcoin. Both number of trades and volume are subject to market fluctuations and are not good indicators of future performance.

Given Bitcoin’s market position as a long-term investment, Coin Days Destroyed (CDD) is a much better indicator of general market sentiment. Refrigerated bitcoins as a long-term store of value are considered more valuable than recently acquired coins.

Every bitcoin accumulates 1 coin every day without being used. As soon as the coins are consumed, the accumulated days are destroyed and registered by the Coin Days Destroyed (CDD) metric. The metric then shows the number of coins used in a transaction multiplied by the number of days since they were last used.

For example, a 0.5 BTC transaction that has been dormant for 100 days will accumulate 50 coin-days, while a 10 BTC transaction that has been dormant for 6 hours will only accumulate 2.5 coin-days. The higher the CDD metric, the higher the economic importance of the transaction.

Since the beginning of the year, CDD has had some big spikes. Almost all of these spikes have been attributed to macro uncertainty and his increased FUD in the market, allowing long-term holders to exit the market and profit.

bitcoin coin day destroyed
Bitcoin’s Coin Days Destroyed (CDD) metric (Source: Glassnode)

The most notable surge in CDD was seen in February 2022, when Russia’s invasion of Ukraine devastated global markets. Fearing further declines and not wanting to risk a prolonged recession, many long-term holders (LTHs) have let go of their BTC positions. It started a domino effect, dragging down the rest of the market.

This metric can be further broken down to show which cohorts are selling their BTC holdings. An analysis of Bitcoin usage by age shows that short-term holders typically initiate the majority of BTC sales in both bear and bull markets. Looking at the CDD metric, short-term holders are defined as a cohort of coins with a holding period of less than 155 days.

But the latest relief rally that saw Bitcoin break the $21,000 resistance prompted another cohort to sell positions, according to data from glass node, users who held bitcoin for one to two years dominated recent bitcoin sales. It is very likely that this cohort bought bitcoin at its peak in January 2021 and that investment lost more than 64% of its value to him.

bitcoin coin day destruction lth sth
Bitcoin spot volume for long-term and short-term holders (Source: Glassnode)

The data also shows that long-term holders of bitcoin for more than two years are largely unperturbed by the recent bailout rally. The only time long-term holders bowed to market pressure was when Terra’s (LUNA) rally in June forced an entire cohort to sell.

Nonetheless, long-term holders remained a stabilizing factor during the June selloff, and have held onto that bastion even as the market enters its third month of decline.

Posted In: Bitcoin, Research

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