CDD or “Understanding Coin Days Destroyed”, which stands for “Destroyed Coin Days” in Turkish, is a data obtained by multiplying the period of inactivity of a crypto asset by its value in motion.
What is CDD?
Understanding Coin Days Destroyed measures the value of an asset spent and the amount of time that asset is idle. To get an asset’s CDD, the asset’s value is multiplied by its idle days. CDD values can be used as a market indicator to examine changes in behavior among investors, especially whales holding enough crypto to influence the market.
The number of days a crypto asset is dormant is known as Coin Days. Each day is added to this value. When the asset is finally moved, posted to an exchange, or used in a P2P (peer-to-peer) transaction, Coin Days are said to be destroyed, i.e. reset.
For example, if 20 Bitcoins stay in a wallet for two weeks, the Coin Days are 14 days, if that asset is finally moved on the fifteenth day, the Coin Days will be reset. CDD takes this value and uses it in a series of calculations.
Why are Coin Days Important?
The daily trading volume recorded for a crypto asset is often used as a measure of its financial viability. When this peaks, more buyers and sellers are thought to enter the market. However, this is not always an obvious measurement. CDD looks at the unspent transaction output (UTXO) for new assets entering the market and examines the value of the transaction and the number of days the asset has been idle.
These values are used to calculate CDD values, which are considered a more reliable representation of the rate at which new sellers or assets enter the market. These metrics are used to back up daily trading volume as a more informed measure of market power and to study the behavior of long-term holders and whales in particular.
How is CDD Calculated?
CDD is the product of the value of the asset spent and the number of days spent asleep. A closer look at the tweet shared at the beginning of this post shows that the investor moved about 278 BTC in the compromised transaction.
For example, if assets are idle for 10.5 years; this is approximately 3,833 coin days (excluding leap years). Coin Days for those 278 bitcoins are now reset when the transaction is confirmed.
Destroyed Coin Days are calculated as follows:
CDD = Sent value x Money Days.
How to Use Days of Destroyed Coins as Indicators?
Coin Days calculations are sensitive to high-value assets in motion, as well as assets that move after a very long period of time. Here are some ways to interpret the values for Coin Days:
Short-term high CDD: A spike in CDD and an increase in trading volume indicates that long-term investors are selling some or all of their holdings to make a profit. This is usually accompanied by increased on-chain activity for that entity.
Consistently high CDD: The fact that CDD stays higher for longer alongside daily trading volume is considered an indication of increased market strength. This is often seen in bull markets, as well as in bearish conditions where long-term investors keep leaving a project due to market conditions or protocol-related issues.
Short Term Low CDD: A low CDD, accompanied by increased or unchanged daily trading volume, indicates that investors are holding their assets for now and the change in trading volume is affected by ordinary liquid assets. On-chain activity for the asset remains low amid varying daily volume.
Continuous Low CDD: A low CDD over a long period of time indicates that investors’ faith in the asset has increased and investors have decided to hold on to their investments for a longer period of time. A consistently low Coin Days is considered a bullish signal and suggests a reversal after a correction as the rate at which underactive assets enter the market slows.
Supply Adjusted and Dual CDD
While Coin Days Destroyed usually looks at the movement of coins in transactions based on how long they’ve been dormant, the supply-adjusted also affects the impact of the overall token supply.
Supply Adjusted CDD
It considers the total supply of the asset against the calculated one. As crypto assets continue to exist, more assets are awarded through mining, vesting time unlocks or staking rewards. As more assets are issued, Coin Days continues to rise, and the supply-adjusted Coin Days describe the impact each token in supply has on the overall Coin Days. It is obtained by dividing CDD by the current total supply:
Supply adjusted CDD = Calculated CDD/Total supply
Binary CDD
Compares the value obtained after CDD adjustment with the average CDD and represents it as 1 or 0. Adjusted for supply is shown as 1 if above average and 0 if below average.
A sustained binary CDD of 1 shows an uptrend, while an alternative binary Coin Days (simultaneous zeros and ones) is bearish.
