What are CDD and Liveliness

CDD, or Coin Days Destroyed, is an indicator that measures the activity level of Bitcoin transactions. It is calculated based on the coin age (holding time) and transaction volume of Bitcoin in each daily transaction. In simple terms, it equals the sum of the coin ages of all active Bitcoins each day. CDD can reflect the state of long-unused Bitcoins.

Specific Factors in the Formula

CDD = Transaction Volume × Coin Age

Transaction Volume = Number of Bitcoins transacted in a specific transaction

Coin Age = The holding/unspent time of Bitcoin before the transaction (calculated in days)

Application of CDD for Analysis

The CDD indicator can be used to measure Bitcoin’s liquidity and market participation, as well as to reflect macro market trends. Since CDD is based on Bitcoin’s holding time, it can indicate behavioral changes among long-term holders. Therefore, it is considered an important tool for assessing whale and long-term investor spending behavior.

When CDD values are high, it indicates increased transaction activity of Bitcoin. A large amount of long-dormant Bitcoins are flowing into the market (which can also be understood as a significant number of long-term holders engaging in transactions within a short period). Funds are flowing in the market and trading is frequent, leading to larger short-term price fluctuations. Historically, this situation typically occurs during bull markets.

When CDD values are low, it indicates reduced transaction activity and a more stable market. Investors tend to hold Bitcoin long-term rather than buy and sell frequently. As a result, Bitcoin’s price movements are relatively small during this phase. This situation usually appears during bear markets or price correction cycles.

From the chart below, it is clear that from October to November 2021, CDD continued to rise, indicating the market was in a bull cycle and approaching the peak.

Source: CryptoQuant Quicktake

Liveliness

Liveliness is also an indicator that measures holder behavior and activity levels. It is calculated based on CDD and can be used to evaluate the holding behavior and trading activity of long-term crypto asset holders. Since Liveliness compares the cumulative CDD of assets with the total supply accumulated in the market, it can more clearly reflect macro market cycle changes. Unlike CDD, which is calculated daily, Liveliness reflects the overall market situation over a period of time.

Specific Factors in the Formula

Liveliness = Cumulative CDD / Cumulative Total Supply = Volume × Lifespan (of all outputs ever spent) / Volume × Lifespan (of all outputs ever created)

Cumulative CDD = The accumulated CDD of assets over a recent period = Transaction Volume × Coin Age (of all Bitcoin with transaction activity in the market)

Cumulative Total Supply = The accumulated asset supply over a recent period = Transaction Volume × Coin Age (of all Bitcoin holdings in the market)

Application of Liveliness for Analysis

The Liveliness indicator can help investors understand the behavior patterns of Bitcoin holders. It reflects the transaction activity and liquidity of Bitcoin over a certain period. The Liveliness value usually fluctuates between 1 and 0.

When Liveliness is low, it indicates that most holders prefer to hold Bitcoin long-term without trading, and on-chain activity is low. The market is relatively stable.

When Liveliness is high, it indicates that a large amount of Bitcoin is being traded within a short period, and market activity is high.

An increasing trend in Liveliness suggests rising on-chain activity. A large number of dormant tokens are re-entering the market, increasing liquidity. This situation is often associated with a bull market.

A decreasing trend in Liveliness indicates declining on-chain activity. Many tokens are entering dormancy, reducing market liquidity. This situation is often associated with a bear market.

Historically, Bitcoin’s Liveliness has clearly reflected market cycles. For example, in early 2021, the market experienced a brief bull run. During that period, Bitcoin’s Liveliness was trending upward, and on-chain activity increased significantly. **$CUDIS **$ELIZAOS **$BROCCOLI **