3/11/2021 Experiments on Cumulative Destruction

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RESEARCH

Experiments on
Cumulative
Destruction
DAVID PUELL, WILLY WOO
9 APR 2019 • 3 MIN READ

Two approaches to bring bitcoin-days-

destroyed into the price domain
Okay, so this article is now well overdue given the recent price action.
BTC never rests! The last few months have been very productive in
terms of discovering new valuation metrics based on on-chain analytics.
The recent proposals using coindays destroyed by Tamas Blummer and
the team at Adamant Capital have put this essential metric once again
on the map. We thought we’d give it a go at coming up with a way to
best translate the concept of destruction into a precise price level for
market analysis.

Experiment A: Cumulative Value-days Destroyed

(CVDD) by Willy Woo
When coins move from one investor to another, the transaction carries
both a USD value and also destroys a time value relating to how long the
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cumulative sum of
this value-time destruction as coins move from old hands into new
hands as a ratio to the market age. It is calculated with the following
f l
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3/11/2021 Experiments on Cumulative Destruction
formula:
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∑ (coin days destroyed ⋅ price)

CV DDU SD =
days ⋅ 6000000

Note that 6 million is used in calibrating the chart. This number is

arbitrary and would be different had we used hours or blocks as unit for
the age of the market.

CVDD has hit the historical Bitcoin price bottoms with remarkable
accuracy.

Unlike Delta Cap, CVDD tends to consistently climb in value - this

becomes useful to frame an increasing lower bound for a market bottom
during bear seasons when the market price is falling.

When used in conjunction with the Top Price model, CVDD and Top
Price provides upper and lower bands for price action.

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When used in conjunction with CoinMetric's Realised Price, CVDD can

help visualization of Bitcoin's accumulation bottoms.

Both CVDD and Realised Price have remarkable resemblances in shape,

its no coincidence that they both use investor HODL time in their
calculation.

It is important to note that both CVDD and Top Price are interesting
curiosities, and are not guaranteed to work in future cycles.

Experiment B: Transferred Price and Balanced Price

by David Puell
Instead of using a 6-million figure, transferred price uses supply to
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bring destruction into the price domain:

∑ (coindays destroyed ⋅ price)

TransferredPriceU SD =
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3/11/2021 Experiments on Cumulative Destruction
TransferredPriceU SD =
days ⋅ supply
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(again, old hands selling into new hands), it can be assumed that when
subtracted from realized price (the average paid for all coins in the
market), a “fair” valuation measure emerges. Balanced price denotes the
level at which, during bear markets, a full detox has been achieved —
market price matching what was paid minus what was spent.

BalancedPriceU SD = RealisedPriceU SD − TransferredPriceU SD

It goes without saying that this evokes Delta Price in both calculation
and visualization. We believe that Delta Price serves as a technical
analysis proxy of Balanced Price. The former seems to be agile enough
to catch exact bottoms — the “wicks” — while the latter catches the full
accumulation level prior to the bull run, also defining the brief moment
when price remains below it as “capitulation.”

More iterations on coindays destroyed to follow. Stay tuned…

This article was co-authored with David Puell, Head of Research at Adaptive
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Capital.

A live chart of these metrics is available at Woobull Charts

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Why does on-chain volume show an overly bearish picture of

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3/11/2021
y y
Experiments on Cumulative Destruction
p
the 2018-2019 Bitcoin market?
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Let's delve into a mystery of this 2018-2019 bear market that David Puell and Murad
Mahmudov and I have been exploring for months... Why does on-chain volume look so
bearish while many of our other (to be published) metrics tell a more positive story?

WILLY WOO
4 APR 2019 • 2 MIN READ

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