This metric shows who sold Bitcoin in the last bear market rally

Measuring the economic activity of a market requires looking at more than just the total transaction volume, especially when it comes to assets as specific as Bitcoin. While both the number of transactions and transaction volume are affected by market fluctuations, they are not good indicators of future performance.

Given Bitcoin’s position in the market as a long-term investment, Coin Days Destroyed (CDD) is a much better indicator of overall market sentiment. Bitcoins held in cold storage as a long-term store of value are considered more important than newly acquired coins, as their movement signals a change in hodler behavior.

Each Bitcoin accumulates one coin day every day it remains unused. As soon as the coin is spent, the accumulated days are destroyed and recorded by the Coin Days Destroyed (CDD) metric. The calculation then shows the number of coins used in a transaction multiplied by the number of days that have passed since they were last used.

For example, a 0.5 BTC transaction that remained dormant for 100 days has accumulated 50 coin days, while a 10 BTC transaction that remained dormant for 6 hours only accumulates 2.5 coin days. The larger the CDD metric, the more financially significant the transaction.

Since the beginning of the year, there have been several major peaks in CDDs. Almost all of these peaks come from increased macro uncertainty and R&D in the market, pushing long-term holders to exit the market and take profits.

The most significant increase in CDD was seen in February 2022, when Russia’s invasion of Ukraine devastated global markets. Fearing a further decline and unwilling to take on the risk of a prolonged decline, many long-term holders (LTHs) exited their BTC positions. It started a domino effect that dragged the rest of the market down.

The calculation can be further broken down to show which cohorts have sold their BTC holdings. Analyzing Bitcoin’s used volume by age indicates that short-term holders typically initiate the majority of BTC sales – both in bear and bull markets. Looking through the CDD calculation, short-term holders are defined as a cohort of coins held for less than 155 days.

However, the recent relief rally that saw Bitcoin break through the $21,000 resistance pushed another group to sell their positions. According to data from Glassnode, users who held Bitcoin for between one and two years dominated the most recent Bitcoin sales. It is highly likely that this group bought Bitcoin during a January 2021 peak and saw their investment lose over 64% of its value.

The data also shows that long-term holders who have been sitting on Bitcoin for over two years were largely unaffected by the recent relief rally. The only time long-term owners succumbed to market pressure was in June of this year when Terra’s (LUNA) pullback pushed all cohorts to sell.

Nevertheless, long-term owners remained a stabilizing factor during the June selloff and are still holding the fort as the market enters its third month of a bearish period.