A large transfer of Bitcoin associated with U.S. law enforcement likely caused a spike in the on-chain metric.
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On March 8, the U.S. government moved 49,000 Bitcoin worth $1 billion seized from the Silk Road. The transfer was accompanied by Bitcoin’s (BTC) price slipping below $22,000, as well as a noticeable spike in a key holder metric.
But does this mean that traders should brace for potential BTC price volatility ahead?
The BTC transfer likely caused a significant spike in Glassnode’s Coin Days Destroyed (CDD) metric. It measures the weighted movement of Bitcoin based on the time it was last moved from an address.
The CDD is calculated by multiplying the amount of Bitcoin transferred by the number of days since BTC was last added to an address.
A spike in the CDD indicator usually precedes price volatility with the bears typically having a slight advantage. Some long-term investors, however, may also move Bitcoin to leverage it for more upside gains on the futures market.
But the current CDD spike to a two-month high does not necessarily suggest that a $1,000 to $1,500 price move is brewing.
For instance, the exchange inflow data shows no significant spikes yet. Instead, around 5,000 BTC (worth around $100 million) was moved out of exchanges in the last 24 hours.
Therefore, the $215 million transfer to Coinbase had little price impact so far. However, with only around 20% moving to an exchange out of 49,000 BTC, the risk of increased selling pressure remains.
Currently, the BTC/USD pair is trading above support between $21,500 and $21,950, which is encouraging for buyers despite a slew of negative news this week. Further confirmation will arrive with consecutive daily closes above this support area.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
