Binary CDD
Binary CDD describes whether Supply-Adjusted CDD on any given day was above or below the historical average.
Last updated
Binary CDD describes whether Supply-Adjusted CDD on any given day was above or below the historical average.
Last updated
Binary Coin Days Destroyed (Binary CDD) is a derivative of the Supply-Adjusted CDD metric. It considers whether the volume of coin days destroyed over the period of interest was more, or less, than the long-term historical average. This provides a view as to whether the spending behaviour of large volumes and/or old coins is significant relative to historical data.
Binary CDD will return either a 1 or a 0:
Returns 1: when measured Supply-Adjusted CDD is greater than the long term average.
Returns 0: when measured Supply-Adjusted CDD is less than the long term average.
Binary CDD is particularly useful when a value of 1 or 0 trends consistently for extended periods of time as it suggests a trend of longer term holding (trend of 0) or increased spending (consistent 1).
Binary CDD is calculated by measuring the long term Supply-Adjusted CDD average, and checking whether the current value higher or lower than this average. Above-average will return a value of 1, while below-average will return a value of 0.
Binary CDD is a powerful tool for identifying trends in long-term holder spending behaviours.
In general, long-term holders (LTH) will spend old coins during bullish trends, taking advantage of market strength and thus destroying a larger than average volume of coin days. Conversely, during bearish market trends, on-chain activity tends to reduce and off-chain exchange volumes dominate activity. During these periods, LTHs and smart money investors often accumulate cheap coins and withdraw them to cold storage. This leads to periods with less than average coin days being destroyed.
Binary CDD is best considered in context of the prevailing market trend and can generally be considered in line with the following framework:
Bullish market trends are typically characterised by sustained periods of Binary CDD = 1, as higher on-chain volumes and older coins are spent into the economy.
Bearish market trends are typically characterised by a 'bar-code' style pattern in the Binary CDD metric with alternating values of 0 and 1, as on-chain volumes and coin lifespans become more variable but with a higher proportion of below average coin day destruction.
Binary CDD can provide additional insight via application of moving averages with the 7-day and 30-day periods recommended. These tools help identify sustained trends and trend direction for relevant spending behaviour. For example, when the 7-day moving average of Binary CDD is equal to 1, it means that coin days destroyed over the past 7-days have been more than the historical average.
The chart below shows the same highlighted zones as the chart above however demonstrates that the 7-day moving average of Binary CDD values are typically > 0.5. Similarly, the Bar-Code pattern is characterised as periods where the 7-day moving average is consistently below 0.5.
Application of a moving average can assist in smoothing out noisy signals for this indicator however will also have a slower response time to trend changes. Where values of 1 are reached with moving averages applied, it indicates that a Binary CDD value of 1 has been sustained over a period of time equal to the moving average period.
Scale: linear.
Moving Averages: None (default). 7-day and/or 30-day for observing sustained trends.
Coined By: Hans Hauge (May 2019)
Hans Hauge - Introducing Binary Adjusted BDD
