Mar 18, 2024 - Economy

"Coin days destroyed" cuts through noise, provides signal in crypto transactions

Illustration of a shattered calendar.

Illustration: Shoshana Gordon/Axios

Coin days destroyed is one of those unique-to-blockchains metrics that have the bonus of evocative terminology.

Why it matters: It's a better way of gauging economic activity for a digital asset, signaling when long-term holders are starting to change behavior.

How it works: Coin days destroyed, or CDD, measures transactions while minimizing irrelevant movements (such as one person moving coins between their own wallets, coin mixers or — more nefariously — a company attempting to fake activity).

  • It gives greater weight to transactions involving coins that haven't moved for a long time.

Example: You are given one bitcoin 100 days ago. Today, you send that bitcoin to the Coinbase exchange because you are ready to sell for gains. In doing so, 100 "coin days" are "destroyed."

  • If you only sent 0.5 bitcoin and held the rest, then only 50 coin days would have been destroyed. Or if you sent one bitcoin after one day, that would only be one day destroyed.

By the numbers: Coin days destroyed = (Number of bitcoin) x (time since last moved).

The big picture: Long dormant bitcoins moving — often from wallets onto exchanges — is signal in the noise of day-to-day exchange transactions.

  • CDD "is particularly well-suited for observing macro trends where entities who accumulated in previous cycles begin spending their coins," Glassnode writes in their treatise on the topic.

What they're saying: In a note from digital asset industry investor Fineqia International's Matteo Greco this morning, he observed that crypto natives are mostly selling now.

  • "Such behaviour is characteristic of early bull phases, where long-term holders distribute assets to new investors," he wrote.

Flashback: The concept of CDD dates back to 2011 when a member of the Bitcointalk forum proposed it.

  • And it isn't limited to Bitcoin.

The bottom line: It is a metric that gives you a sense of who's in the market at that moment.

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