Data shows Bitcoin’s active addresses have not increased significantly, suggesting that the current rally may not be sustainable.
Bitcoin Active Address (30-Day MA) Stalls Despite Rally
As analysts in the CryptoQuant post pointed out, the previous BTC rally saw a metric increase in value. “Active addresses” is an indicator that measures the total number of Bitcoin addresses per day that participate in some transaction activity on the chain.
Metrics account for senders and receivers and calculate unique addresses. This means that if the address has made several transactions throughout the day, it will still be included only once.
When the indicator is high, it often means that many addresses are involved in some network activity. The trend shows that the blockchain is attracting the attention of traders and market participants.
On the other hand, a low value indicates that there are not enough active users on the network, which can indicate that the general trading interest around cryptocurrencies is low.
Now, here’s a chart showing the trend in the 30-day moving average (MA) of Bitcoin’s active addresses over the past few years:
The 30-day MA value of the metric seems to have been mostly moving sideways in recent days | Source: CryptoQuant
As shown in the chart above, these numbers highlight a consistent pattern that was seen during the two previous incidents where Bitcoin was in a state of recovery. During the 2019 rally and the pullback from the COVID-19 crash in 2020, the 30-day MA BTC active address experienced an upward trend.
This means that when the price rises in this case, user activity also increases, indicating that demand is returning to the cryptocurrency. This surge in activity is helping to keep the price rally going and on.
In the case of recovery from the crash of COVID-19, user activity also continues to see some further increases, which could eventually lead to the bull run of 2021. The current scenario is more similar to the 2019 rally, as the price increase also occurred as the coin appeared to recover from the bear market.
Since the current rally has been formed, there has been no noticeable increase in the 30-day MA Bitcoin active address, suggesting that the demand for the coin may not change despite the price increase.
The “price” of an asset is determined by the laws of supply and demand in the market. The Crypto market is no exception,” explained the analyst. “For asset prices to rise, interest and market demand must be supported.”
Unless the active address sees a sharp rise in the coming days, the rally may not stick to the pattern it has in the past.
BTC price
At the time of writing, Bitcoin is trading around $24,700, up 15% over the past week.
BTC moves sideways | Source: BTCUSD on TradingView
Featured images from Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com