Direct Answer
The average number of days that coins had been unmoved at the time they were spent, in a period. It equals coin days destroyed divided by the number of coins transferred. High dormancy means the coins being spent were old on average, which is read as older holders becoming active.
Dormancy: Formula, Meaning, Signals, Examples and How to Use It
How Is Dormancy Calculated?
The average number of days that coins had been unmoved at the time they were spent, in a period. It equals coin days destroyed divided by the number of coins transferred.
Formula: Dormancy = coin days destroyed / total coins transferred in the period
Inputs:
- Coin days destroyed for the period
- Total coins transferred in the period
Worked example. If 2,400,000 coin days were destroyed while 600,000 coins moved (illustrative values), average dormancy is 4.0 days. The inputs are illustrative numbers, not market data.
Reading it. High dormancy means the coins being spent were old on average, which is read as older holders becoming active. Low dormancy means mostly recently moved coins were spent. It normalizes CDD for transfer size, so it is less swayed by volume spikes.
Limits. Many tiny or exchange-related transfers pull the average down, and one large old coin can pull it up. It measures movement, not intent to sell.
What is Dormancy?
The average number of days that coins had been unmoved at the time they were spent, in a period. It equals coin days destroyed divided by the number of coins transferred.
How to use Dormancy
High dormancy means the coins being spent were old on average, which is read as older holders becoming active. Low dormancy means mostly recently moved coins were spent. It normalizes CDD for transfer size, so it is less swayed by volume spikes. A reading alone is never a buy or sell signal; it needs context from price structure, volume, volatility and the broader market regime.
Strengths
- Dividing coin days destroyed by coins moved gives an average age per coin, which removes the effect of how many coins moved on a given day.
- Expressed in days, the output reads as an intuitive average holding time of the coins that changed hands.
- Reproducible when the formula and data convention are fixed.
Weaknesses and limitations
- A day with very few coins transferred makes the ratio unstable, since a small denominator magnifies even a modest amount of coin days.
- The average is over coins moved, not over supply, so it describes the age of moved coins and is silent about how old the unmoved coins are.
- Correlated indicators can create false confidence by repeating the same underlying information.
Editorial and risk note
This page is educational content, not individualized investment advice. It should not imply guaranteed prediction, accuracy or outperformance.
Frequently Asked Questions
Is Dormancy a buy or sell signal?
No. High dormancy means the coins being spent were old on average, which is read as older holders becoming active. Many tiny or exchange-related transfers pull the average down, and one large old coin can pull it up. A trade built on it still needs a trigger, an invalidation rule, a position size and realistic execution assumptions.
What is the best setting for Dormancy?
Dormancy takes these inputs: coin days destroyed for the period; total coins transferred in the period. There is no universal best setting for the tunable ones, so test them across instruments, regimes and out-of-sample periods and favor stable parameter regions over one historical winner.
Can Dormancy be used by itself?
Many tiny or exchange-related transfers pull the average down, and one large old coin can pull it up. It measures movement, not intent to sell. For that reason it is read next to measures of direction, participation, valuation, liquidity and risk, not alone.
Does Dormancy work on every timeframe?
The calculation (Dormancy = coin days destroyed / total coins transferred in the period) can be run on any bar size, but behavior is not portable: a reading on a five-minute chart describes a very different market window from the same reading on a daily chart. Validate the exact timeframe before relying on it.
Why does Dormancy give false signals?
A day with very few coins transferred makes the ratio unstable, since a small denominator magnifies even a modest amount of coin days. The average is over coins moved, not over supply, so it describes the age of moved coins and is silent about how old the unmoved coins are. Lag, noise and regime changes add to this, because market participants react to new information after the reading is calculated.
How should Dormancy be backtested?
Rebuild Dormancy from coin days destroyed for the period using point-in-time data, write the rules before testing, include delisted securities where relevant, model realistic fills and costs, reserve a validation sample and compare with a simpler baseline.