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Examining Bitcoin’s “Coin Days Destroyed”

Below is an excerpt from the Deep Dive, Bitcoin Magazine’s premium markets newsletter. Subscribe now to be the first to get these insights and more on-chain market analysis right to your inbox.

Today’s Daily Dive will focus on coin days destroyed and the latest trends around this metric. The metric ‘coin days’ was first brought up as ‘bitcoindays destroyed’ by Bytecoin on the forum BitcoinTalk back in 2011.

“Coin days” refers to how long a coin has been dormant. One bitcoin that hasn’t moved in one year would accumulate 365 coins days. Similar to the above, 365 bitcoins that have not moved in the past year would be worth 365 coin day.

When looking at the number of coin days lost, the metric multiplies the total number of coins (technically: UTXOs), and divides it by the number days that those coins were dormant. This number is the total coin days that were destroyed in a given day. This metric can be used to gauge the activity of older investors and determine whether transactions on the network are being made by new or existing holders.

It is difficult to see the coin days that have been destroyed by themselves. However, the daily data is distorted by large outliers. Below is a chart showing the coin days that have been destroyed in the history of Bitcoin.

The data is still not very useful but the trends are becoming more obvious when you apply a seven-day moving mean to it. Moving averages that are longer in time frame than the coin day destroyed data give investors a better view of investor/HODLer trends.

Large parabolic price increases have been met with huge spikes in coin destruction as investors (rightfully so), realize gains on their investments. You can see the large amount of coin days that were destroyed at the top of 2013, 2017 and 2021.

Clear trends are evident in the history of bitcoin when we look at the rolling sum of the coin days lost over the past 90 days (different from the moving average).

It is interesting to note that, unlike previous bull runs that saw a blowoff top, the sharp downtrend in the 90-days coins days destroyed that followed a large spike in the currency and the local price top has seen price respond in an meaningful way. The current price response is up 70% over the past five weeks, while the 90 days coin destroyed metric continues to fall to near five year lows.

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