Like any financial market, the of cryptocurrencies is full of metrics that allow us to understand in what situation is. Thus, since the volume of transactions per day, up to the variations of price and the ranking of the major exchanges, all these data allow us to plan an investment strategy. However, one of the most important metrics of the crypto world is very little known, so today we explained what is Bitcoin Days Destroyed, and what is its importance.
Bitcoin Days Destroyed (BDD)
The crypto world is full of facts and figures. So many that sometimes it is difficult to locate the information we need at a given time, to know how to act within the market. Or worse yet, we find ourselves with data that we’re not quite sure what purpose they serve. This being the case, on many occasions, the Bitcoin Days Destroyed (BDD).
And is that, Bitcoin Days Destroyed is a measure to visualize the volume of transactions in the crypto market. By measuring it through the multiplication of the number of Bitcoins traded in a operation any, by the number of days elapsed since the last time that those same BTC were moved.
That is to say, suppose that we acquire 100 Bitcoins the day Monday and for Friday the sell. Five days have elapsed, which is multiplied by 100 Bitcoins to give a total of 500 BTC. Now, if the person who bought us the cryptocurrencies re-sell the day Sunday, will have passed two days, so that the value of the BDD will be 200 BTC.
Bitcoin Days Destroyed is one of the most important metrics of the crypto market. Source: Blockchair.
What purpose does this serve?
Now, if the concept of Bitcoin Destroyed Days it is not difficult to understand once it is explained with an example, still remains to be clarified what is its usefulness in practical terms. Then, at the end of the day, it is not at all obvious what we can do, knowing which is the multiplication between the number of Bitcoins traded, and the number of days since your last operation.
In this sense, the Senior Analyst of CoinDesk, Galen Moore, commented in the podcast CoinDesk Crypto Podcast Network, what is the importance of the BDD. Explaining that the same would be a metric of the behavior of investors in the long term:
“(BDD) is a metric that reflects the collective action of holders of long-term ( … ) What is the psychology of a holder in the long term? You can see a collective way (through BDD) in a way that I don’t think that is possible in other asset classes“.
Therefore, thanks to the use of Bitcoin Days Destroyed, any user or investor in the crypto world you can observe the trends of the large holders of Bitcoin.
So, when this metric starts to increase, we know that the holders are carrying out operations with their cryptocurrencies. While if it decreases, we understand that there is a propensity to save, the more that the trading. All of which allows us to be more effective when planning our investment strategy.