On-chain data shows demand for Bitcoin has returned recently, but is growing more slowly than previous cycles at the same stage.
Bitcoin Active Addresses Haven’t Developed Recently
As indicated by the analyst in the CryptoQuant post, market activity quickly changed after the bottom was formed during the previous cycle. The relevant indicator here is “active addresses,” which measures the total number of Bitcoin addresses per day that participate in some transaction activity on the chain.
The metric only measures unique addresses, meaning that if an address participates in multiple transfers in a day, it is still counted only once. The indicator also records the sender and receiver in this measurement.
When the value of this metric is high, it means that many addresses are making transactions on the network today. The trend shows that cryptocurrency is actively attracting users to trade on the current chain.
On the other hand, low values indicate that not many users are making transfers on the current blockchain. A trend like this can indicate that demand for the asset is currently low.
Now, here’s a chart showing the trend in Bitcoin active addresses over the past few years:
Looks like the value of the metric hasn't moved much in recent weeks | Source: CryptoQuant
As shown in the chart above, the active address of Bitcoin has dropped to a relatively low value during the bear market, but recently some improvements have been registered in the indicator.
In a bear market, the price is usually consolidating endlessly, so not many users find interesting coins to trade. However, during volatile movements, investors rush to trade, so the metric can show higher values.
An example of recent activity that suddenly returned like this can be seen when FTX fell on the chart. When the price started to tilt again after the crash, the active address also fell again.
Metrics have seen some increases with the latest rally in the price of Bitcoin, but the rise is still not very significant. In comparison, the 2018-2019 cycle saw activity quickly pick up after a bear market bottom formed.
Quant has also attached the annual active address of the detrended price oscillator (DPO) to better illustrate the difference between the current and previous cycles. As seen in the chart, the trend in DPO is only showing early signs of a bear market exit so far in the current cycle.
“At this point, fear outside the network may be driving full demand and delaying a sharper improvement in the network’s fundamentals,” the analyst said. “The perception of a likely turbulent year in terms of macroeconomic conditions has not led to greater risk appetite and investors remain cautious.”
BTC price
At the time of writing, Bitcoin is trading around $23,700, down 1% over the past week.
BTC has declined recently | Source: BTCUSD on TradingView
Featured images from Dmitry Demidko on Unsplash.com, charts from TradingView.com, CryptoQuant.com