It is a Bitcoin-specific thing, but it could be applicable to other markets. (All Bitcoin-derived cryptos such as Litecoin, Darkcoin, Peercoin, Namecoin, etc. also have it.)
Basically, if address X owns 1 BTC for 1 day, it has 1 Coin-Day. When X transfers that 1 BTC to address Y, that Coin-Day is destroyed. Y now has 1 BTC, but it starts at 0 coin-days. 24h after receiving the 1.0 BTC, it has 1.0 Coin-Days.
Basically it is how "old" the coin is in that address. Analyzing this can tell you a lot about trading volume and whether it is "real volume" or just re-cycled coins.
If I have 1 BTC that I keep sending to myself (to new addresses) over and over and over, I can generate a lot of transaction volume, but none of it is "real" (it's still my 1 BTC) and this is reflected by the fact that each of these transactions will have very few Coin-Days Destroyed.
It would be super interesting if stock markets kept track of stuff like this, but I don't think they do.
Thanks for the great answer! So to reiterate, it is the number of BTC * Days elapsed since a trade has occurred.
Well, really it's just "transaction" since (due to anonymity) it's impossible to know where a given transaction was an actual "trade" or just somebody sending money to their own addresses.
I wonder if any of the exchanges have utilized this measurement to help deter price manipulation of the instrument...
I suppose it would be more difficult without a blockchain, eh? If I had better knowledge of what kind of transaction records WS keeps perhaps I could "hash out" a way that it would be feasible. Any ideas?
Thanks again!
No idea. I'm sure that an exchange could keep track of it internally, but as you said, since exchange transactions are off-blockchain, there's no way for any of us to tell. But Bitcoin does have it built-in, and you can see the CDD in a given Bitcoin block, or add it up to find the CDD destroyed in a day, or what have you.
It's also worth noting that Bitcoin has transaction fees, and these transaction fees are usually determined by 3 factors, including CDD. Basically the transaction fees are there to deter spam (people sending money around for no reason but taking up space in the blockchain) and if the CDD are high enough then the fees are essentially waived. However, it is up to every user and every miner to determine their own policies for fees. If you choose to send a transaction without a fee, it might be ignored by miners for hours or days. (This has happened to me several times.)
