One quant pointed out how the Bitcoin indicator senses selling pressure in the market and preempts the resulting price decline.
Bitcoin CDD registrations spike before recent price plunge
In a new post on X, the analyst discussed how the Coin Days Destroyed (CDD) on-chain indicator can be used to identify selling pressure in the market early.
“Coin Day” refers to the amount of 1 BTC accumulated while staying on the blockchain for 1 day. If a token remains dormant for a while, it will naturally accumulate a certain amount of coin days, and when it is finally sent to the network, the coin days counter will be reset back to 0.
The coin days this token held prior to this move were said to have been “broken” by the transaction. CDD tracks the total number of days resets over the network on any given day.
Now here is a chart showing Bitcoin’s CDD trend over the past few months.
The pattern that the indicator has followed alongside the BTC price in the past two months | Source: CryptoQuant
As shown in the graph above, Bitcoin CDD observed a large surge just a few days ago. Whenever the value of this indicator spikes, it means that a large amount of coins that were previously dormant are now in motion.
These transfers are usually correlated with long-term holding whales, which are large entities that hold coins for significant periods of time, accumulating many coin days.
When these dormant companies finally break their silence, it is often for sales-related purposes. So a surge in CDD could be an indication that HODLer whales have decided to do some selling.
On the chart, the quant highlighted the major spikes observed by the indicator over the past two months. After these surges begin, asset prices generally appear to trend downward.
The aforementioned surge a few days ago also proved to be bearish for the asset, which occurred when Bitcoin recovered to $67,000, with the price subsequently erasing this recovery. Some of these diamond hands appear to have viewed this surge as an exit opportunity.
Last month, CDD saw two spikes that were larger than the recent one. This surge occurred near the high point of the rally so far. Therefore, selling pressure from HODLers may have influenced this top and subsequent decline.
Given the relationship this indicator maintains with the Bitcoin price, it is worth keeping an eye on as it could continue to indicate that selling pressure is about to begin in the near future.
BTC price
Bitcoin continued its downward trend over the past day, currently falling to the $62,300 level.
Looks like the price of the coin has been going down over the last few days | Source: BTCUSD on TradingView
Kanchanara from Unsplash.com, featured image from CryptoQuant.com, chart from TradingView.com
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