Bitcoin Active Addresses ‘Worried Analyst’ Despite 50% BTC Price Gains
Bitcoin (BTC) still lacks on-chain volume and active address increases that characterize bull markets, research warns.
In an honest assessment of the BTC price rally in 2023, chain analysis platform CryptoQuant warned that Bitcoin may be weaker than it seems.
Active addresses do not copy the bull market paradigm
As on-chain metrics turn green and some even flash bull signals not seen in years, a healthy dose of suspicion remains among many analysts.
CryptoQuant contributor Yonsei_dent is among them, writing in one of the platform’s Quicktake blog posts this week that 2023 doesn’t match previous bull markets.
The problem, he explains, lies in active addresses, which are not increasing in number despite BTC/USD gaining nearly 50% so far this year.
“Active Addresses is a metric that includes all addresses that send and receive BTC, and provides a look at how active market demand is,” the blog post said.
The “price” of an asset is determined by the laws of supply and demand in the market. Crypto markets are no exception. For asset prices to rise, market interest and demand must be supported.”
An accompanying chart shows the 30-day moving average (MA) of active addresses rising after the end of the 2018 bear market and the March 2020 cross market crash of COVID-19. 2023, however, has yet to produce the same trend.
“You can see that Active Addresses (30DMA) rallied both during the turnaround in the 2019 bull market and coming out of the 2020 COVID-19 shock,” Yonsei_dent added.
“I am concerned that this 2023 rally did not show any increase in active addresses.”
Many transactions, not much volume
Other research this week is producing similar conclusions about Bitcoin investor habits, which have followed the return to $25,000.
Related: A “snap back” to $20K? 5 things to know in Bitcoin this week
Volume in the chain, notes research firm Glassnode, remains low, and both long-term owners (LTHs) and short-term owners (STHs) are reluctant to spend money.
“Despite net growth in on-chain activity, and an ATH in total UTXOs, transfer volumes are remarkably muted, both for long-term and short-term holders,” it wrote in the latest edition of its weekly newsletter, “The Week On-Chain.” “
However, there are some encouraging signs that sentiment is improving, with coins sent to exchanges by LTHs now largely turning a profit.
In mid-January, Glassnode shows, 58% of LTH coins sent to exchanges were moved at a loss, while at the beginning of this week the figure was only 21%.
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