A new study warns that Bitcoin still lacks the increase in on-chain transaction volume and the number of active addresses — the hallmark of a bull market.
In a candid assessment of BTC’s price recovery in 2023, on-chain analytics platform CryptoQuant has warned that Bitcoin could fall more than expected.
Active addresses do not replicate the bull market model
Many analysts remain skeptical of bullish signals as on-chain indicators turn green, some even sending bullish signals not seen in years.
CryptoQuant contributor Yonsei_dent, among them, wrote in a Quicktake blog post for the platform this week that 2023 does not coincide with previous bull markets.
The problem, he explained, is active addresses, the number of which hasn’t changed despite BTC/USD’s nearly 50% year-to-date gain.
“Active Addresses is an indicator that includes all addresses sending and receiving BTC, outlining dynamic market demand.”
“‘The price of an asset is determined by the laws of supply and demand in the market. The cryptocurrency market is no exception. For an asset to rise in price, it must boost market demand and interest.”
The 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 market crash due to the COVID-19 pandemic. In contrast, 2023 has yet to generate a similar trend.
“You can see that active addresses (30DMA) increased both during the 2019 bull market and during the 2020 COVID-19 shock,” Yonsei_dent said, adding:
“I’m concerned that a rally in 2023 won’t show any bullish signals for active addresses.”
Bitcoin active address map. Source: CryptoQuant
many transactions but not quantity
Another study on the habits of Bitcoin investors came to the same conclusion, with the price rising to $25,000.
Analyst firm Glassnode noted that on-chain transaction volume remains low, with both long-term (LTH) and short-term (STH) holders reluctant to spend.
“Despite a net increase in on-chain activity and the total number of UTXOs reaching ATH, LTH and STH migrations have declined significantly.”
Bitcoin sales chart. Source: Glassnode
There are some encouraging signs that sentiment is improving, with LTH sending tokens to exchanges mostly profitable at the moment.
In mid-January, Glassnode stated that 58% of LTH funds sent to exchanges were at a loss, up from 21% earlier this week.
LTH suffers losses while trading. Source: Glassnode
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As reported by Cointelegraph