Hang Hauge, a senior quantitative researcher from Ikigai, has created a new metric in order to know the future price of Bitcoin. He calls it “Bitcoin Days Destroyed”, which you have to agree is a pretty cool name. In order to create his analysis, Hauge has identified two different kinds of Bitcoin traders who are prevalent in the market. They are the “newbs” and the “veterans”, two very explanatory names.
The newbs are the people who just got to the Bitcoin market now and have started to invest only recently. They are generally very emotional and tend to buy when the prices are at the top and sell when it is at the bottom.
According to him, this kind of trader is the one that is not really very well informed when making decisions. They hold BTC for short periods and are the ones most prone to lose money during the bear markets.
While Hauge does not use the word, these are the losers of the market. They will let their emotions carry them and will almost always be in a bad position, except when they are very lucky.
Veterans are, obviously, described as the antithesis of the Newbs. They have been involved in the market for more time, sometimes for several years, and they hold BTC for the long term, always researching the market well. They generally buy when the prices are low and only sell when they reach their target.
Using “Bitcoin Days Destroyed” To Determine Demand
By using this information, Hauge devised a new metric called Bitcoin Days Destroyed (BDD). The metric is used to determine the demand for Bitcoin. It does it by multiplying the quantity of BTC by the days that passed ever since the tokens were moved around.
Basically, if a coin is held by a veteran (someone who is holding it for a longer time span), this token is more valuable than one which has been held only a for a few days and will probably be passed around soon again.
Doing this, in his opinion, is a very helpful move in order to better segregate the data between the traders who are experienced in trading and the weak newcomers.
The “Destroyed” part of the equation happens then. A Bitcoin Day is destroyed whenever the token has been moved. Basically, if you have 1 BTC for seven days, you have seven days in the equation and they are destroyed when the person moved them, therefore 7 BDD.
In order to make this data as accurate as possible, he has also created an equation to measure the Adjusted BDD, which takes the value into account by dividing it by the daily circulating supply of tokens. By using this information, you can see when the veterans and the newbs are leaving the market, which basically proves that the veterans generally exit when near the top.
Another interesting take from his model is that the charts show that when there are less BDDs, there is a higher chance that a bull market is about to start. This is when most people start to hold tokens while waiting for the market to improve.
It can also be considered an important factor the “Value of Coin Days Destroyed”, which highlights the day in which more days are destroyed than created. According to the inventor of the metric, this is important because it measures the USD against how much BTC is being held.
He also uses a median average in order to work a signal line that will indicate when there is a good buying opportunity or not and another metric that determines the USD equivalent of holders against sellers.
The Future Of Bitcoin Is Bright
The result, when evaluating the data, is that the future is actually pretty bright right now. The data show that the market has already bottomed at the beginning of the year, so the chances are that the way is up.
If you are interested in the analysis made by Hans Hauge, you can read it here. It is pretty technical, but if there is something that you can clearly see reading his research is that the most expert technical investors are the ones coming out on top.
- Source: First Appeared Here
- Published Time: 2019-06-01 15:16:25
The views and opinions expressed in the article New “Bitcoin Days Destroyed” Metric Paints a Bright Picture For the Value of the BTC Price do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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