Coin Years Destroyed (CYD) takes the rolling sum of coin days destroyed (CDD) over the previous 365-day period as a macro indicator for annual economic activity.
CYD is derived from the coin days destroyed (CDD) metric and will increase proportional to the volume and lifespan of coins spent on-chain over the past year. Changes in CYD values and trend can signal changing sentiment of coin holders as relatively more or less coin days are destroyed over the last year.
The CYD metric can generally be considered within the following framework:
High values and up-trends (Bullish markets) suggest that an increasing volume of coin days were destroyed over the past year. This may indicate that long term holders (LTHs), who's coins have accumulated long lifespans, are spending coins and may lead to an increase in liquid coin supply.
Low values and down-trends (Bearish markets) suggest that an decreasing volume of coin days were destroyed over the past year. This may indicate that long term holders are spending fewer coins and interest in the asset is in decline, leading to reduced on-chain transaction activity.
Sideways trends (Accumulation) suggest an equilibrium in the volume of coin days destroyed has been reached over the past year. This may indicate that spending and distribution behaviour has slowed and accumulation is taking place by smart money investors which may lead to a decrease in liquid coin supply.
The magnitude of CYD values can be compared to historical data points as a gauge on relative spending behaviour and as an indicator for macro market structure. It is important to note that over time, the protocol will naturally accrue more coin days and thus relative magnitude of CYD can be expected to increase over time. The Supply-Adjusted CYD metric accounts for this phenomena by adjusting the CYD indicator proportional to the increase in circulating supply over time.
CYD is calculated as the rolling sum of CDD over a 365-day window.
CYD is a valuable tool for observing macro trends in spending behaviour, particularly for changes such as transition into distribution, accumulation or holding. Given direct derivation from the CDD metric, CYD inherits many of the underlying properties, however is modified to target cyclical behaviour only within the last year.
A common assumption is smart money entities and long term holders are more likely to have strong fundamental knowledge about the asset, tend to purchase coins at prices considered cheap, and spend coins considered expensive. Furthermore, during bearish markets, interest in the asset tends to drop off and on-chain activity slows down leading to fewer coin days being destroyed.
During bullish markets, long term holders tend to spend coins and realise profits into market strength. This leads to increases and up-trends in the CYD metric. The gradient of the CYD metric provides an indication of relative volumes of coin days are destroyed, with steeper up-trends suggesting increased spending behaviour.
During bearish markets, long term holders tend to hold onto their coins and potentially transition into strategic accumulation. Simultaneously, wider market interest in the asset and protocol begins to wane leading to decreased on-chain activity, fewer coin days destroyed and thus down-trends in the CYD metric.
During periods of accumulation, smart money investors begin accumulating relatively cheap coins, often after market capitulation events and at points where interest in the asset is at a relative minimum. CYD reaches an equilibrium point and trades sideways as fewer old coins are spent, and network traffic is dominated by young coins moving into long term storage.
Aside from identification of macro market trends, CYD can provide valuable insight into market extremes such as generational market tops and capitulation/accumulation zones.
Historically, periods of maximum opportunity for accumulation have occurred after sustained down-trends in the CYD metric during bear markets. As spending behaviour and market sentiment begins to transition from bearish to a stable supply-demand equilibrium, CYD often reaches a lower bound and trades sideways, forming a cyclical bottom pattern.
Periods of market exuberance and irrationality often occur during parabolic markets, ending in blow-off tops. Long term holders often increase their spending through this period, realising profits by distributing expensive coins with the associated impact on liquid coin supply. CYD rallies higher during these periods and tends to reach a cyclical peak at, or shortly after the global market top.
Supply-Adjusted CYD accounts for the impact of time on the CYD metric. Since more coin days are accrued over time, the total potential CYD increases over time. As such, adjusting for supply (an increase in the number of coins in circulation over time) in the denominator provides a more proportional view of dormancy over the history of a market.
Buyer and Seller Behavior: Analyzing Bitcoin’s Fundamentals by Ark Invest and David Puell