Bitcoin Days Destroyed (BDD for short) was proposed in 2011 as a way to measure the total transaction volume on the Bitcoin network by accounting for how long coins remain unspent. BDD is also known as Coin Days Destroyed.
Total transaction volume may be a misleading gauge of network activity, as an individual could be sending bitcoin between multiple addresses that they own. With Bitcoin Days Destroyed, the number of coins that are moved are multiplied by the number of days they remained unspent.
BDD = (number of coins moved in a day)*(number of days coins remained unspent)
The BDD metric can be used to provide an upper bound on the velocity of money and filters out the ‘noise’ by ignoring those bitcoins that are constantly being moved. A rising BDD value indicates a lower velocity and lower total transaction volume while a falling BDD value indicates increasing velocity and transaction volume. However, since bitcoin transactions are pseudonymous, BDD may overstate the velocity of bitcoin.
The metric also tells us how much bitcoins have been traded over any period of time, for example, how many bitcoins were traded in the last day, week or month and provides a lower-bound percentage on the proportion of bitcoin users that are holding coins.
BDD also provides a lower bound on the duration that a certain set of coins have been hoarded for and makes the metric useful for gauging whether early adopters are cashing out. For instance, a large BDD value would indicate that coins that have remained unspent for several years have been moved, and could suggest that an early buyer is selling.
You can create your own BDD charts by using data from Blockchair.