A quant has pointed out how a bitcoin metric may have detected selling pressure in the market in advance and therefore subsequent price drops.
bitcoin CDD Recorded Spikes Before Recent Price Drops
in a new bitcoin-with-CDD-Data-and-Its-Impact-on-Prices” target=”_blank” rel=”nofollow”>mail On x, an analyst has discussed how the Coin Days Destroyed (CDD) on-chain indicator can be used to identify selling pressure in the market early.
A “coin day” refers to the amount that 1 btc accumulates after sitting still on the blockchain for 1 day. When a token sits idle for a while, it naturally accumulates a certain number of coin days and once it is finally transferred to the network, its coin days counter resets to zero.
The transaction is said to “destroy” the days worth of currency this token carried prior to this move. The CDD keeps track of the total number of such days that are restored to the network on a given day.
Now, here is a chart showing the trend of bitcoin CDD over the past few months:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/04/This-Bitcoin-Metric-Foreshadows-Recent-Price-Drops-Quant-Reveals.png" alt="bitcoin CDD” width=”1280″ height=”521″ loading=”lazy” data-recalc-dims=”1″/>
The pattern that the indicator has followed alongside the btc price in the past two months | Source: bitcoin-with-CDD-Data-and-Its-Impact-on-Prices" target="_blank" rel="nofollow">CryptoQuant
As shown in the chart above, bitcoin CDD saw a huge surge just a few days ago. Every time the value of this metric skyrockets, it means that a large number of coins that were previously idle are now in motion.
These transfers are generally correlated with long-term holding whales, which are large entities that hold their coins for significant periods of time and therefore accumulate a large number of coin days.
Often, when these dormant entities finally break their silence, it is for sales-related purposes. As such, spikes in CDD may be an indication that HODLer whales have decided to do some selling.
On the chart, the quant has highlighted the main peaks that the indicator observed during the last two months. It would seem that following the emergence of such spikes, the overall asset price has come to witness some bearish action.
The aforementioned spike from a few days ago has also proven to be bearish for the asset to the extent that it occurred when bitcoin had recovered towards $67,000, and the price has since erased this recovery. It would seem that some of these diamond hands had seen this rise as an exit opportunity.
Last month, the CDD had seen two spikes even larger than the recent one. These spikes occurred near what remains the high of the rally so far. Therefore, selling pressure from HODLers may have played a role in this high and the subsequent drop that followed.
Given the relationship this metric appears to have with the price of bitcoin, it may be worth keeping an eye on it, as it may also continue to signal the start of selling pressure in the near future.
btc Price
bitcoin has continued its bearish trajectory over the past day and has now fallen towards the $62,300 level.
x/Fi6sSPML/” alt=”bitcoin price chart” width=”1534″ height=”854″/>
Looks like the price of the coin has been going down over the last few days | Source: BTCUSD on TradingView
Featured image by Kanchanara on Unsplash.com, CryptoQuant.com, TradingView.com chart
Disclaimer: The article is provided for educational purposes only. It does not represent NewsBTC's views on whether to buy, sell or hold investments, and investing naturally carries risks. It is recommended that you conduct your own research before making any investment decisions. Use the information provided on this website at your own risk.
