Bitcoin Binary CDD Approaches Breakout That Historically Kicked Off Bull Rallies
On-chain data shows the Bitcoin binary CDD is currently nearing a breakout that has marked the start of bull rallies in the past.
Bitcoin Binary CDD Has Been Trending Up Recently
As pointed out by an analyst in a CryptoQuant post, the binary CDD is currently inside the “accumulation zone.” To understand what the “binary CDD” indicator does, the concept of “coin days” needs to be looked at first.
A coin day is a quantity that 1 BTC accumulates after sitting dormant for 1 day on the blockchain. This means that, for instance, if a stack of 3 coins sits still for 3 days, it will have amassed 9 coin days in total.
Now, when the coins that have accumulated some amount of coin days are eventually moved across wallets, their coin days counter naturally resets back to zero, and these coin days that they had previously accumulated are said to be “destroyed.”
The “Coin Days Destroyed” (CDD) is a metric that keeps track of such coin days being reset across the entire BTC network. When this indicator has an elevated value, it means a large number of dormant coins are possibly moving on the network right now.
A cohort called the long-term holder (LTH) group holds onto their coins for long periods of time (thus amassing a large number of coin days), so when the CDD is high, it implies these investors are on the move.
As mentioned before, the relevant version of the CDD here is the binary CDD, which is a metric that basically tells us whether the current value of CDD is higher than the average or not.
Here is a chart that shows the trend in this 182-day moving average (MA) of this Bitcoin indicator over the last few years:
Looks like the 182-day MA value of the metric has seen some slight rise in recent days | Source: CryptoQuant
As you can see in the above graph, the quant has highlighted the trend that the 182-day MA Bitcoin binary CDD followed just before two previous rallies. It seems like both before the April 2019 rally and the bull run in the first half, the metric broke out of the “accumulation zone.”
This zone, which occurs below a value of 0.3, is named so because values of this kind suggest the LTHs aren’t showing much selling/moving activity right now and are thus accumulating the cryptocurrency.
This kind of trend is commonly seen during bearish trends, as the chart shows. In bull runs, however, the metric approaches a value of 1, meaning that these LTHs start selling more aggressively.
Interestingly, while this pattern formed in the aforementioned rallies, the second wave of the 2021 bull run didn’t see observe significant breakouts in the indicator.
Recently, the metric has seen some rise again and is approaching the 0.30 line after being in the accumulation zone for 529 days. From the chart, it’s visible that previous attempts during this bear market ended up in a rejection of the metric.
If the breakout is successful this time, however, then this Bitcoin rally could see a big boost, if the previous instances of this trend are anything to go by.
At the time of writing, Bitcoin is trading around $26,900, up 36% in the last week.
BTC seems to have shot up in the last couple of days | Source: BTCUSD on TradingView
Featured image from Traxer on Unsplash.com, charts from TradingView.com, CryptoQuant.com
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