Glassnode data shows that new BTC and ETH address dynamic indicators indicate that the Bitcoin network is growing, while the sentiment on the Ethereum network is the opposite.
An increase in the number of daily active users, increased transaction throughput, and growing demand are often characteristics of healthy network adoption. With this in mind, the analyst examined the New Address Dynamics, New Entity Dynamics, and Active Address Dynamics indicators for BTC and ETH.
New address dynamics
The number of new addresses recorded on-chain can be an effective tool for gauging the intensity, trends, and dynamics of network activity.
Due to intraday fluctuations in on-chain activity metrics, the absolute number of new addresses on any given day may not be informative. Instead, comparing the size and trends of new addresses entering the market on a monthly or yearly basis may be more informative.
New BTC Address Dynamics | Source: Glassnode
The graph above reflects the average monthly and annual number of new addresses on the BTC chain, represented by the red and blue lines, respectively.
New Entity Dynamics
This metric represents new entities joining the blockchain and can provide meaningful insights when used in conjunction with the New Address Dynamics metric.
Similar to the new address dynamics graph, the graph below represents the average monthly and annual new BTC entity dynamics since 2010. The pink line represents the monthly average, while the colored line green represents the annual average.
New BTC Entity Dynamics | Source: Glassnode
Both metrics highlight relative changes in prevailing sentiment and help identify when network activity shifts. When the monthly average exceeds the yearly level, it indicates that on-chain activity is expanding, which usually reflects fundamental network improvements and increased network usage.
If the annual average exceeds the monthly average, it indicates that on-chain activity is shrinking, a classic sign of deteriorating network fundamentals and declining network usage.
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The chart shows that both the New Address Momentum and New Entity Dynamics indicators for BTC are currently well above the yearly average. Historical data shows that whenever these indicators exceed the annual average, there is bullish sentiment. The latest example comes in the first month of 2023, when BTC rose from roughly $15,000 to $24,000.
This also supports the thesis that the 2021 bull market ended in mid-2021 and that the November rally was not natural but driven by derivatives.
From the observation point of view, 2021 saw the first effective addition of new entities to the BTC network, but the flow stopped briefly in early 2022, but it can be said that this period is at the end of the bull market.
Ethereum
ETH’s metrics reflect mixed sentiment. The chart below shows average monthly and yearly active address dynamics and new address dynamic metrics for ETH.
ETH active address dynamics | Source: Glassnode
Address Dynamics new Ethereum | Source: Glassnode
Both metrics were below the annual average, suggesting a lack of new entrants to the network. These indexes are below the annual average since early 2021.
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