This is one of the metrics which is useful to estimate the Bitcoin selling pressure in the market.
The Bitcoin Coin Days Destroyed metric measures the economic activity behind transactions by giving more weight to coins that haven’t been spent for a long time.
Each day a single Bitcoin remains unspent in a Bitcoin wallet, it accumulates one “coin day”. The longer a Bitcoin remains unmoved, the more coin days it gathers.
When a Bitcoin is finally spent, all the accumulated coin days are “destroyed”. This is a measure of how many coin days were wiped out by that transaction.
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This metric helps understand the significance of a transaction in terms of the time since the coins were last moved.
High values of Coin Days Destroyed suggest that old coins, which have not moved for a long time, are being transferred. This can indicate potential selling pressure by long-term holders or important shifts in ownership.
Case 1
If a Bitcoin investor has held 20 Bitcoins in his wallet for 100 days. If he decides to move all 20 BTC from his wallet, the Coin Days Destroyed would equal 2,000
20 Bitcoins x 100 days = 2,000 coin days destroyed.
This large amount is an indication that Bitcoins which were calm for a long period are now active. In this scenario, we can say that long-term investors are beginning to transfer their Bitcoin holdings, maybe they are going to make money or change their investment assets.
Case 2
Now consider another case, in which a Bitcoin investor moves 10 Bitcoins, but these Bitcoins were only in his wallet for 10 days, or say purchased by him one & half week ago. In this case, the Coin Days Destroyed for his transaction would be 100.
10 Bitcoins x 10 days = 100 coin days destroyed.
This is a very small number and it indicates a lesser economic impact on the Bitcoin market as these coins were relatively active.
Read also: How does the “Bitcoin STH-LTH Cost Basis Ratio” help in investment decisions?
Bitcoin “Coin Days Destroyed” metric explained!
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