Bitcoin analysts are now looking at the Cumulative Value Days Destroyed (CVDD) metric to predict the next possible top for the cryptocurrency. The CVDD is a metric derived from the Coin Days Destroyed (CDD) which measures the number of coin days being destroyed across the market on any given day. Coin days are accumulated when 1 BTC sits dormant on the blockchain for 1 day, and when the BTC is moved, the coin days are “destroyed.”
The CVDD adds another layer of context by accounting for the USD value of every coin, breaking dormancy to destroy its coin days. Unlike the CDD, which only tracks the number of coin days being destroyed on any given day, the CVDD is a cumulative sum of the asset’s history. This indicator has been remarkably accurate for locating historical bottoms in Bitcoin’s price, with the original CVDD concept being devised by analyst Willy Woo.
The “Assessing Tops” modification of the CVDD from CryptoQuant author Binh Dang combines the 50-day moving average of the Bitcoin spot price with the CVDD to assess probable points of tops in the asset. The Bitcoin Assessing Tops indicator currently suggests a potential top at $89,200. When the Bitcoin spot price breaches this indicator, it tends to be overheated and prone to forming tops, as seen in previous instances where the asset reached a top shortly after breaching the indicator.
Currently, Bitcoin is trading at around $69,300, down more than 1% over the past week. However, if Bitcoin were to rise to $89,200, it may not necessarily mean that a top has formed, but the indicator suggests that a peak may become close if Bitcoin reaches this level. Ultimately, the CVDD metric combined with the Assessing Tops indicator provides analysts with valuable insights into potential tops for Bitcoin’s price, allowing for more informed trading decisions based on on-chain data.
In conclusion, the CVDD metric and the Assessing Tops indicator offer a unique perspective on predicting potential tops for Bitcoin’s price based on on-chain data. By analyzing the cumulative value destruction of Bitcoin over time alongside the 50-day moving average of the spot price, analysts can assess possible points where the asset may form tops. With Bitcoin currently trading at $69,300, the indicator suggests that a potential top could be around $89,200, providing traders with valuable information to make informed decisions in the volatile cryptocurrency market. By incorporating on-chain metrics like the CVDD and Assessing Tops, analysts can gain a better understanding of Bitcoin’s price movements and make more strategic trading decisions based on data-driven insights.
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