# Dormancy Flow

### 📘 Dormancy Flow

#### What Is It?

**Dormancy Flow** is an advanced version of average dormancy that factors in market capitalization.\
It reflects the age of coins being spent **relative to the total market size**.

> Think of it as:\
> “Are old coins being moved in a way that’s significant compared to the size of the entire market?”

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### 🔢 Formula

<figure><img src="/files/0w9LxJtyqnfJ9HBuqECe" alt=""><figcaption></figcaption></figure>

* `b_cdd`: Total coin-days destroyed
* `b_val`: Total coin volume moved
* `Market Cap`: Total market value of all circulating coins

***

### 🧭 What Is It Used For?

* **Bottom Signal Detection:**\
  Historically, Dormancy Flow reaching extremely low levels (near historic bottoms) has marked excellent long-term buying opportunities.
* **Behavioral Risk Tracking:**\
  It shows when the spending of aged coins is **dangerous** to market stability relative to size.
* **Valuation-Based Sentiment Indicator:**\
  If Dormancy Flow is high → older coins are moving heavily compared to the market size\
  If Dormancy Flow is low → low pressure from long-term holders

<figure><img src="/files/bESeT5O5T2XCBnCXNjYZ" alt=""><figcaption></figcaption></figure>

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### 🎯 Why It Matters

Unlike raw or average dormancy, Dormancy Flow adjusts for how large the market is at that moment.

> Example:\
> 10M coin-days destroyed during a $100B market is **very different** than 10M destroyed during a $1T market.\
> The latter is relatively insignificant—Dormancy Flow captures that nuance.

***

### 🔍 What to Watch For

* **Extremely Low Values:**\
  Indicates bottom-like behavior. Long-term holders are inactive, sentiment is cold.
* **Spikes During Uptrends:**\
  Older coins being sold into strength—possible early signs of distribution.
* **Rising Flow + Flat Price:**\
  Suggests internal rotation or hidden selling pressure.

***

### ⚙️ How It Works

1. Calculate average dormancy (b\_cdd / b\_val)
2. Normalize it by dividing by market cap
3. Result is a dimensionless number indicating LTH activity in context

***

### 🧠 Strategic Interpretations

* “Dormancy Flow is at historic lows. Similar levels in the past marked cycle bottoms.”
* “Flow spiked during price consolidation. Smart money may be selling quietly.”
* “Stable Dormancy Flow means LTHs are calm and not contributing to volatility.”


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