Bitcoin CDD Shows Bullish Breakout, Rally Returning In Full Flow?

On-chain data shows a bullish breakout brewing in the Binary CDD indicator for Bitcoin, a sign that a strong price rise could be ahead for the asset.

As pointed out by an analyst in a CryptoQuant Quicktake post, the Binary Coin Days Destroyed (CDD) appears to be forming a pattern for the cryptocurrency that has usually been the starting point of a bullish trend.

A “coin day” refers to a quantity that 1 BTC accumulates after staying dormant on the blockchain for “1” day. When a token that had been dormant for some number of days finally moves on the network, its coin days counter naturally resets back to zero.

The coin days that this token was carrying are thus said to be “destroyed.” The CDD keeps track of the total number of such coin days being reset through transactions across the network.

The Binary CDD, the actual metric of interest here, compares the current CDD against its historical average to tell us whether the CDD is higher or lower than the norm right now. As its name suggests, it can only assume one of two values: 0 or 1.

Now, here is a chart that shows the trend in the Bitcoin Binary CDD over the last few years:

From the graph, it’s visible that the Bitcoin Binary CDD didn’t register a value of 1 too frequently between the end of the 2021 bull run and the final parts of 2023. Since around November of last year, though, the density of instances where Binary CDD observed 1 has grown stronger.

When the Binary CDD is 1, it means that the CDD is greater than its historical average currently. This implies that old coins are observing more movement than usual right now.

The “long-term holders” (LTHs) are investors who carry large amounts of coin days at any given point, as they tend to keep their BTC dormant for long periods (the cutoff for a holder to be included in the cohort is 155 days).

As such, spikes in the CDD tend to signal that these HODLers are on the move. “In an upward cycle, the movement of long-term holders increases as the price rises (orange boxes), and in a downward cycle, it decreases (blue boxes),” notes the quant. “This pattern has been repeating since the previous cycles.”

Since the LTHs have started to move now, it’s possible the market is now in the same phase as during the previous bullish periods, highlighted with the orange boxes by the analyst.

A similar pattern is also visible in the 182-day moving average (MA) of the Binary CDD, as the chart below shows.

As is apparent from the graph, the 182-day MA of the Bitcoin binary CDD is beginning to break out of the accumulation zone, which is something that has historically led to sustained price surges for the cryptocurrency.

“It’s still worth monitoring, but finally, it has broken out of this range,” says the quant. “If it strongly surpasses this range, there is a high possibility that a full-fledged upward price cycle is beginning.”

After its dip towards the $42,200 mark over the weekend, Bitcoin appears to have kicked off the week with a return back above $43,000.