A quant has pointed out how a Bitcoin metric may have detected selling pressure in the market, and therefore, the subsequent price drops, in advance.
Bitcoin CDD Registered Spikes Before Recent Price Plunges
In a new post on X, an analyst has discussed about how the Coin Days Destroyed (CDD) on-chain indicator may be used to identify selling pressure in the market early.
A “coin day” refers to the quantity that 1 BTC accumulates after staying still on the blockchain for 1 day. When a token stays dormant for a while, it naturally accumulates some number of coin days, and once it’s finally transferred on the network, its coin days counter resets back to zero.
The coin days that this token had been carrying prior to this movement are said to be “destroyed” by the transaction. The CDD keeps track of the total number of such days being reset across the network on any given day.
Now, here is a chart that shows the trend in the CDD for Bitcoin over the last couple of months:
The pattern that the indicator has followed alongside the BTC price in the past two months | Source: CryptoQuant
As displayed in the above graph, the Bitcoin CDD observed a large spike just a few days ago. Whenever this metric’s value shoots up, it means that a large amount of coins previously dormant are now on the move.
Such transfers are generally correlated with the long-term holder whales, who are large entities who carry their coins for significant periods, and thus, accumulate a large number of coin days.
Often, when these dormant entities finally break their silence, it’s for selling-related purposes. As such, spikes in the CDD can be an indication that the HODLer whales have decided to do some selling.
In the chart, the quant has highlighted the major spikes that the indicator observed during the last two months. It would appear that following the onset of such spikes, the asset’s price has generally gone on to witness some bearish action.
The aforementioned spike from a few days ago, too, has proven to be bearish for the asset so far as it occurred when Bitcoin had recovered towards $67,000, and the price has since erased this recovery. It would appear that some of these diamond hands had looked at this surge as an exit opportunity.
Last month, the CDD had seen two spikes even larger than this recent one. These spikes had occurred near what continues to be the top for the rally so far. Thus, the selling pressure from HODLers may have played a role in this top and the subsequent drawdown that followed.
Given the relationship that this metric has appeared to have held with the Bitcoin price, it may be worth keeping an eye on it, as it may continue to indicate the onset of selling pressure in the near future as well.
BTC Price
Bitcoin has continued its bearish trajectory during the past day as it has now slipped towards the $62,300 level.
Looks like the price of the coin has been going down over the last few days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, CryptoQuant.com, chart from TradingView.com
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