New Indicators Search for ‘Fair’ BTC Value

Colin Muller

The prolific crypto analyst Willy Woo has come up with yet another novel indicator, the Cumulative Value Days Destroyed (CVDD) indicator, for assessing the Bitcoin (BTC) network’s characteristics. This addition joins the already jarring array of analytic creations by Willy Woo.

The concept of Bitcoin “days destroyed” follows other indicators, such as the Network Value Transaction (NVT) ratio, in an attempt to arrive at some relevant metric(s) of the leading crypto’s actual utility in the world.

Within the cryptoasset industry, the search for these new metrics is necessary because traditional methods of measuring an asset or stock’s value - such as earning reports, or a PE ratio - are not applicable to Bitcoin.

Cumulative Value Days Destroyed

CVDD works like this. The active ingredient, so to speak, of the CVDD is the “age” of a quantity of bitcoin; specifically, how long that bitcoin was held by its previous owner. This value has been known as “days destroyed,” and Woo is keen to emphasize that he didn’t come up with that specific concept.

However, the way he’s applied it is novel. Whatever the contemporaneous price was of the bitcoin sold from one entity to another, is multiplied with the amount of time the transferred coins had been held (plus an arbitrary calibration factor thrown in).

willy woo cvdd(source: Woobull.com)

Thus the metric produces a measurement of how much “HODLing” was “destroyed,” as it were, in a sale or transfer. We can see, below, how that HODL-destruction tends to spike during drastic price rise - when holders sell their bags to new buyers.

willy woo cvdd(source: Woobull.com)

Woo goes further with the CVDD by combining it with another, slightly older metric called Realized Price - an attempted improvement on market capitalization that “[tries] to discount coins that might be lost.”

Woo combines CVDD with Realized Price in an attempt to find a more “fair valuation” of all bitcoins, and produce this fair value visually as a moving average. It looks a little something like this:

willy woo cvdd(source: Woobull.com)

The chart looks pretty good, if we are considering our prospects for ending the dreaded “crypto winter” of 2018 and beyond. Indeed, the last two weeks have given cause for hope that this is in fact the case.