On-chain data suggests that a sell-off by long-term Bitcoin holders may have contributed to the cryptocurrency’s recent dip below $19,000.
Bitcoin exchange inflows into CDD have recently observed a sharp increase
As one analyst in CryptoQuant pointed out postallong-term holders may face some selling pressure in the near term.
A relevant metric here is Bitcoin’s “Coin Days Burned” (CDD). A coin day is defined as the amount of exactly 1 BTC accumulated when idle for 1 day. Therefore, the total number of days a coin has on the market represents the sum of the time each coin in the supply has been dormant.
When these previously placed coins still show some movement, the coin days they earn are called “burned” as they reset to zero. These totals are exactly what the CDD indicator measures.
Now, as long-term holders hold their coins for a long time, they naturally accumulate significantly more coin days than the rest of the market. Therefore, a spike in CDD may be a sign of activity in this cohort.
Here is a chart showing the trend of Bitcoin CDD, not for the entire network, but specifically for exchange inflows:
Looks like the 14-day moving average value of the metric has been quite high in recent days | Source: CryptoQuant
As you can see in the chart above, the 14-day MA for inflows into CDD on Bitcoin exchanges has recently spiked. This suggests that long-term holders have been depositing large sums of money with exchanges over the last week.
In the past, such spikes in exchange inflows into CDDs have generally been detrimental to the price of cryptocurrencies, as these investors typically deposit on exchanges for dumping purposes.
This time, BTC observed a plunge from local highs around $22,500 shortly after the indicator’s rise.
However, after this slump, exchange inflows to CDD still haven’t dropped much and have remained high. This could mean that the LTH sell-off could be the reason for Bitcoin’s recent brief dip below the $19,000 level.
At the time of writing, Bitcoin’s price is hovering around $19,100, having lost 12% last week. The cryptocurrency has lost 8% in value over the past month.
The chart below shows the trend of the coin’s price over the past five days.
The value of the crypto seems to have already recovered back above $19k | Source: BTCUSD on TradingView
Featured image from Jason Hillier on Unsplash.com, charts from TradingView.com, CryptoQuant.com